All eyes on Jio Financial Services listing price as countdown begins

In another 24 hours, a separately-listed business venture from the Mukesh Ambani-owned Reliance Industries (RIL) will manifest with the demerger of Jio Financial Services (JFS) on July 20. This will be the first spin-off of an independent business from RIL post the split in 2005 when Mukesh's younger brother, Anil Ambani, formed the Anil Dhirubhai Ambani Group comprising Reliance Energy, Reliance Infocomm, and Reliance Capital.

Reliance is demerging its financial services arm, Reliance Strategic Investments, which would be renamed later on as Jio Financial Services Ltd. As per the deal, all RIL shareholders, as of the record date of July 20 will get one share of Jio Financial Services Ltd (JFS) for every RIL share they own.

A special price discovery session for RIL shares will commence between 9:00 AM to 10:00 AM on July 20, and the price at which the highest orders will be matched will be the opening stock price. However, Jio Financial Services will debut at a constant price, which will be arrived at based on closing price on July 19 (ex-date for demerger) and the price derived during the special pre-open session on July 20. For example, if Reliance Industries stock closes at ₹2,822 on July 19 (Wednesday) and settles at ₹2,700 during the special pre-open session, the value of Jio Financial would be ₹122. JFS will remain part of the indices at a constant price until it officially gets listed. The constant price will be the difference between the demerged scrip's closing price on the ex-demerger date and the price discovered during the special session.

To facilitate the demerger, Reliance's futures and options contracts ending July 27, August 31, and September 28 will expire today and fresh contracts with the same expiry dates will be re-introduced on July 20.

The exchanges will create a temporary stock ticker for JFS, which will be added to the indices. Only when the date for JFS' formal listing is announced, will the dummy ticker be replaced with an actual symbol. Jio Financial will be removed from all the indices after the close of trading on the third day of listing at the market-determined price.

The financial services business will comprise Reliance Retail Finance, Reliance Payment Solutions, Jio Information Aggregator Services, Reliance Retail Insurance Broking, Reliance Strategic Investments, Jio Payments Bank, and Reliance Industrial Investments and Holdings, the investment unit of the company.

Brokerages such as Axis Securities expect Jio Financial to list at ₹160 a share, while Nuvama estimates a value of ₹168 a share. According to Macquarie, JFS is set to become the fifth-largest financial services player in India. Incidentally, Axis has suggested investors should buy RIL shares before the record date as it believes that is an economical way to buy into the financial services company.

The investment of RIL in Reliance Industrial Investments and Holdings Limited, which is a part of the financial services undertaking of RIL, will stand transferred to JFSL. RIIHL is the ultimate beneficiary of 6.1% RIL shares through its interest in Petroleum Trust and Reliance Services and Holdings. Axis Securities has valued JFS at 1 time RIL's treasury stock valuation and given RIL's outstanding shares of 676.6 crore, the brokerage has arrived at a valuation of ₹160 a share for JFS.

JFS plans to launch a consumer and merchant lending business based on proprietary data analytics to complement and supplement the traditional credit bureau-based underwriting. It will also evaluate organic growth, joint-venture partnerships and inorganic opportunities in insurance, asset management and digital broking segments.

Reliance (ranked 104th) is the largest private sector company from India to feature in Fortune's Global 500 list of "World's Largest Companies" for 2022.