RIL gets shareholders, creditors approval for demerger of Jio Financial

Billionaire Mukesh Ambani-led Reliance Industries (RIL) has received the approval of its shareholders and creditors to demerge Reliance Strategic Investments Ltd (RSIL) from the parent company. RSIL is currently a wholly-owned subsidiary of RIL and an RBI-registered non-deposit-taking systemically important non-banking financial company. The demerger paves the way for the splitting-off of the financial services arm into a separate entity, which will be listed on the domestic stock exchanges, BSE and NSE. The new entity will be named Jio Financial Services Limited (JFSL).

Reacting to the news, the shares of RIL rose as much as 0.64% to ₹2,435.20 on the BSE, while the market capitalisation of the country’s most valued firm climbed to ₹16.48 lakh crore. Earlier today, the Sensex heavyweight opened marginally higher at ₹2,423.40 against the previous closing price of ₹2,419.80. The stock hit a 52-week high of ₹2,816.35 on June 3, 2022, while a 52-week low of ₹2,180 on March 20, 2023.

In a BSE filing on Wednesday, the oil-to-telecom conglomerate said the demerger will be done through a share-swap arrangement under which Reliance shareholders will be issued one equity share of JFSL for every share they hold in the company. The investment of RIL in Reliance Industrial Investments and Holdings Limited (RIIHL), which is a part of the financial services undertaking of RIL, will stand transferred to JFSL.

As per the exchange filing, Reliance secured almost 100% of the votes in favour of the resolution in a meeting held on May 2.

Last year in October, Reliance, the country’s largest company in terms of market capitalisation, announced that it will demerge its financial services business and list it separately on stock exchanges.

Reliance has been building a vibrant financial services platform to create value for every stakeholder. JFS is uniquely positioned to capture multiple growth opportunities in financial services bringing millions of Indians into formal financial institutions. It will be a technology-led business, delivering financial products digitally by leveraging the nationwide omnichannel presence of Reliance’s consumer businesses, as per the company.

JFS plans to acquire liquid assets to provide adequate regulatory capital for lending to consumers and merchants. Besides, it will incubate other financial services verticals such as insurance, payments, digital broking, and asset management for at least the next three years of business operations.

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

For the fourth quarter of 2023 (Q4FY23), RIL posted a 19% year-on-year increase in its consolidated net profit for the quarter ended March. The revenue from operations rose 2% year-on-year to ₹2.16 lakh crore in Q4 as against 2.11 lakh crore in the corresponding quarter last year. EBITDA increased 21.8% year-on-year to ₹41,389 crore on account of higher revenue and increase in margins in the digital services segment, favorable mix, and operating efficiencies in the retail segment. The digital services segment achieved 15.4% year-over-year growth while the retail segment grew by 19.4%. Revenue from the oil & gas segment doubled on account of higher price realisations.