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In a significant development, Reliance Industries Limited (RIL) is all set to demerge its financial services business, Reliance Strategic Investments (RSIL), from its parent company.
The demerged entity, to be renamed Jio Financial Services (JFSL), will soon be listed separately. This move aims to unlock the potential of the financial services vertical within the Reliance conglomerate.
The National Company Law Tribunal has approved the demerger, and the record date for the demerger has been set for July 20. Shareholders of RIL will receive one share of Jio Financial for every share they own of RIL.
Let’s delve into the details of this development, including the share allotment, expected share price, and board members’ appointments.
Jio Financial Services Market Listing Record Date: July 20, 2023
On July 20, 2023, the record date will be observed to determine the equity shareholders entitled to receive shares of Reliance Strategic Investments.
The demerger scheme specifies that Reliance Strategic Investments will allot one fully paid-up equity share of RSIL, with a face value of Rs 10 each, for every one share of Reliance Industries held by the shareholders as of the record date.
This allocation will be made in accordance with the terms of the scheme, which sets July 1 as the effective date for the demerger.
Jio Financial Services Market Share Allotment Details
As per the demerger scheme, shareholders of Reliance Industries will receive one share of Jio Financial for each share they own of RIL. This share allotment ensures that existing shareholders participate in the new entity’s growth and value creation.
Reliance Industries has taken this step to separate its financial services business and unlock its potential as an independent entity.
The fully paid-up equity share of RSIL, with a face value of Rs 10 each, will be allotted to the equity shareholders of Reliance Industries.
Jio Financial Services Board Members Appointments
The RIL board has approved the appointment of Hitesh Sethia as the CEO and Managing Director of RSIL for a period of three years.
Hitesh Sethia, associated with McLaren Strategic Ventures, brings a wealth of experience and expertise to lead the financial services business. In addition, Rajiv Mehrishi, former Union Home Secretary, and Sunil Mehta, former MD and CEO of Punjab National Bank (PNB), will join the company as independent directors.
These appointments aim to strengthen the leadership and governance of the new entity. Moreover, Isha Ambani, the daughter of Mukesh Ambani, Chairman and Managing Director of RIL, has been appointed as a non-executive director of Jio Financial Services, subject to approval from the Reserve Bank of India (RBI).
Jio Financial Services Expected Share Prices
Several global brokerage firms have provided their Jio Financial Services‘ share price estimates.
JPMorgan estimates the share price to be around Rs 189, while Centrum Broking has set a range of Rs 157-190. Jefferies estimates the share price to be approximately Rs 179.
These projections indicate positive market expectations for Jio Financial Services and its potential to compete with established players like Paytm and Bajaj Finance in the financing segment.
Jio Financial Services’s Market Value/Market Cap
Jio Financial Services is poised to create significant value in the financing segment. With an estimated underlying net worth of about Rs 1,50,000 crore, the company holds approximately Rs 1,10,000 crore worth of shares of Reliance Industries. The remaining balance represents the real net worth of the company.
JFSL invests in six companies: Reliance Industrial Investments and Holdings (RIIHL), Reliance Payment Solutions, Jio Payments Bank, Reliance Retail Finance, Jio Information Aggregator Services, and Reliance Retail Insurance Broking.
After the demerger, JFSL will acquire liquid assets to ensure sufficient regulatory capital for lending to consumers, merchants, and other stakeholders. Additionally, the company plans to incubate other financial services verticals such as insurance, payments, digital broking, and asset management over the next three years.
Reliance Announces July 20 as Record Date for Jio Financial Demerger
- Reliance Industries (RIL) sets July 20 as the record date for the demerger of its financial services arm, Reliance Strategic Investments.
- The demerged entity will be renamed Jio Financial Services (JFSL).
- The demerger aims to unlock value for RIL’s 36 lakh-strong shareholder base.
- RIL shareholders will receive one share of Jio Financial for each share they own of RIL.
- The stock price of RIL has already risen by 13% in the last three months.
- The demerger scheme’s effective date is July 1.
Jio Financial Services Key Details
- RIL received regulatory approval for the demerger last month.
- The decision was made at a board meeting of the company.
- RIL is India’s largest company by market capitalization.
- JFSL CEO and MD: Hitesh Sethia (from McLaren Strategic Ventures).
- Non-executive director: Isha Ambani (subject to RBI approval).
- Independent directors: Rajiv Mehrishi (former union home secretary) and Sunil Mehta (former MD and CEO of PNB).
Jio Financial Services Roadmap and Listing
- JFSL’s roadmap will be unveiled at RIL’s upcoming annual general meeting (AGM).
- The AGM date is yet to be announced.
- JFSL is expected to be listed on stock exchanges, possibly in September.
Jio Financial Services Analysts’ Perspectives
- JPMorgan estimates Jio Financial’s share price at Rs 189.
- Jefferies predicts Jio Financial’s share price at Rs 179.
- Centrum Broking suggests a price range of Rs 157-190.
- JPMorgan maintains an overweight rating on RIL, with a target price of Rs 2,960.
Jio Financial Services JFSL’s Future Position
- JFSL aims to become India’s fifth-largest financier in terms of capital.
- JFSL will compete with Paytm and Bajaj Finance.
- RSIL and financial services undertaking have a combined net worth of Rs 280 billion.
- JFSL may monetize its investments for growth and incubate other businesses in the financial services sector.
Jio Financial Services Valuation and Stakeholder Information
- Centrum values JFSL’s core net worth at 3-5x P/BV.
- JFSL’s investments in RIL are estimated at a 30% holding company discount.
- Promoter’s stake in JFSL will be 49.11% after the demerger.
- JFSL’s per-share value in RIL’s sum-of-the-parts valuation is estimated in the range of Rs 147-178.
Jio Financial Services Rationale Behind the Demerger
- RIL believes the financial service business has distinct nature and competition.
- It can attract different investors, strategic partners, lenders, and stakeholders.
- Demerger’s decision aims to position JFSL strategically in the financial services sector.
Jio Financial Services Conclusion
The demerger of Reliance Strategic Investments and subsequent listing of Jio Financial Services marks an important milestone for Reliance Industries Limited. This strategic move will unlock the potential of the financial services vertical and enable it to compete with established players in the market.
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The share allotment, expected share price, and board members’ appointments highlight the company’s commitment to creating value for its shareholders and ensuring strong leadership and governance. With an estimated net worth of Rs 1,50,000 crore and investments in various sectors, Jio Financial Services is poised to become a significant player in the financial services industry.
The demerger and subsequent business operations will provide opportunities for growth and expansion, benefiting consumers, merchants, and stakeholders alike.
FAQS
What is the record date for the demerger of Reliance Strategic Investments?
The record date for determining the equity shareholders entitled to receive shares of Reliance Strategic Investments has been fixed as July 20, 2023.
How will the share allotment be carried out for the demerger?
Under the demerger scheme, Reliance Strategic Investments will allot one fully paid-up equity share of RSIL, with a face value of Rs 10 each, for every one share of Reliance Industries held by the shareholders as of the record date.
Who has been appointed as the CEO and MD of RSIL?
Hitesh Sethia, associated with McLaren Strategic Ventures, has been appointed as the CEO and MD of RSIL for a period of three years.
Who are the independent directors joining the company?
Rajiv Mehrishi, former Union Home Secretary, and Sunil Mehta, former MD and CEO of PNB, will join the company as independent directors.
What are the estimated share prices for Jio Financial Services?
JPMorgan estimates the share price to be around Rs 189, Centrum Broking sets a range of Rs 157-190, and Jefferies estimates it to be approximately Rs 179.
How does Jio Financial Services plan to expand its operations?
Jio Financial Services aims to acquire liquid assets to provide adequate regulatory capital for lending and plans to incubate other financial services verticals such as insurance, payments, digital broking, and asset management for at least the next three years.
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