Jio Financial’s shares list at Rs 265 on BSE and Rs 262 on NSE; slumps 5% after debut

Reliance Industries Ltd (RIL) had spun off JFSL on July 20.

At a closing price of Rs 251.75 on the BSE, the market capitalisation of JFSL stood at Rs 1.60 lakh crore. At this valuation, JFSL is the third-largest NBFC in the country after Bajaj Finance (Rs 4.27 lakh crore) and Bajaj Finserv (Rs 2.36 lakh crore). It is the 34th highest valued company, above giants such as Tata Steel, Coal India and SBI Life.

Market experts said passive funds which are tracking the Nifty or the Sensex sold the stock as it will be out of Nifty or Sensex on August 24.

“We believe the JFSL would face short-term selling pressure as the street assumes the fair value of share price Rs 150-180 apiece on stake valuations and post listing the stock is trading at much higher price than its assumed fair value,” said Prashanth Tapse, Research Analyst and Senior Vice President (Research) Mehta Equities Ltd.

IIFL Securities has indicated JFSL’s valuation at Rs 200-320/ share ($15-25 billion).

According to Geojit Financial Services’ Chief Investment Strategist V K Vijayakumar JFSL’s valuation is based on expectations surrounding its future growth potential and its 6.1 per cent stake that it owns in RIL.

The future growth prospects of JFSL are indeed bright since it can scale up its business hugely with its enormous connection with consumers and merchants,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Last week, BSE said that the shares of JFSL will be admitted to dealings on the exchange in the list of T Group of securities. The scrip will be in the Trade-for-Trade segment for 10 trading days.

Since the stock is in the T segment institutional selling is dragging the price down, Vijayakumar said.

Trade-to-Trade is a stock segment where shares are traded only on a delivery basis which means that the delivery of the stock cannot be taken on the same day. This is done to prevent volatility and price manipulation. The T Group represents securities which are settled on a trade-to-trade basis as a surveillance measure.

IIFL Securities in a note said it estimates JFSL’s lendable net worth to be $2.7 billion, and expects it to initially target consumer durable, unsecured personal loans and small ticket merchant loans.

“We expect gradual scale-up (save for any acquisitions), as it builds out physical and collections infrastructure (29 employees currently vs peers having 800-4,000 branches and 4,000-66,000 employees). Over the medium term, we expect JFS to add larger ticket size and secured consumer, merchant and MSME loans,” the note said.

In July, JFSL and the US-based investment company BlackRock announced to form a 50:50 joint venture to enter into the country’s mutual fund industry.