Reliance Industries, India’s leading conglomerate, is set to demerge its financial services business, Jio Financial Services, to unlock value for its shareholders. This move has generated significant interest in the market, with analysts estimating the potential valuation of the newly spun-off entity. In this blog, we delve into the details of the demerger process and its potential implications for investors.

The Demerger Process and Valuation

Reliance Industries will demerge its financial services business, Reliance Strategic Investments, which will be renamed Jio Financial Services (JFS). Shareholders of Reliance will receive one share of JFS for each share of Reliance they hold. To determine the value of JFS shares, the local stock exchanges will conduct a special “price discovery” session for the first time ever. Five analysts estimate the value of JFS shares to range between Rs 160-190.

Market Reaction and Share Performance

Since announcing the record date for the demerger, Reliance’s shares have surged 8%, outpacing the broader market’s rise. Investors have shown enthusiasm for the prospect of unlocking value through the demerger.

Special “Pre-Open Call Auction” Session

On the demerger day, the National Stock Exchange and Bombay Stock Exchange will conduct a “pre-open call auction” session for Reliance between 9:00 a.m. to 10:00 a.m. IST (0330-0440 GMT), with the previous day’s closing price as the reference price. The difference between Reliance’s last close and JFS’s settling price at the end of this session will determine a constant share price for Jio Financial Services.

Inclusion in Indexes and Listing Date

JFS’s stock will be included in all existing indexes, including the prestigious Nifty 50, on the demerger day but will not be tradable until it is officially listed. The listing date is expected to be announced at Reliance’s forthcoming annual general meeting.

Potential Benefits of Jio Financial Services

Analysts foresee promising prospects for JFS, considering its access to vast amounts of data and Reliance’s non-bank finance company license. These factors could propel the company to become an AAA-rated entity, allowing it to borrow at attractive rates, providing a strong foundation for its lending operations.

Summing it up

The demerger of Jio Financial Services from Reliance Industries marks a significant step in unlocking value for the conglomerate’s shareholders. As the “price discovery” session determines the share value, investors eagerly await the listing of JFS and its potential in the financial services sector. With the backing of Reliance’s resources and expertise, Jio Financial Services is poised for growth and may emerge as a prominent player in the financial landscape.