RIL near record high ahead of Jio Financial demerger; up 12% so far in July

Analysts value Jio Financial Services at Rs 161/share, which is 1x RIL's treasury stock valuation of Rs 1,087 billion or $13 billion

Shares of Reliance Industries (RIL) scaled a fresh 52-week high of Rs 2,845, up nearly 1 per cent on the BSE in Wednesday’s intra-day trade ahead of the demerger of its finance arm Jio Financial Services. The stock was quoting close to its record high level of Rs 2,855, touched on April 29, 2022.

RIL on July 8 announced in a BSE filing that the National Company Law Tribunal (NCLT) had approved the planned demerger of Jio Financial Services.

After NCLT approval, RIL announced July 1, 2023 as the effective date of the Jio Financial demerger and July 20 as the record date for issuance of shares of Reliance Strategic Investments (RSIL). Prior to listing, the demerged RSIL will be renamed as Jio Financial Services (JFS). After the listing, JFS will become a separate company mirroring the shareholding of RIL.
 

The ratio for demerger is set at 1:1. This means for each share of RIL held before the record date on July 20, the company will award one share of JFS. JFS is expected to get listed in the next two-three months.

Meanwhile, BSE and NSE will conduct a special pre-open session on July 20 for RIL to discover its price after the demerger. The previous session's closing price of RIL will be the reference price for this session.

Business plan for JFS is likely to be announced close to its listing. This could help determine a suitable valuation for the demerged entity. JFS and its subsidiaries will leverage RIL’s technology capability and focus on digital delivery of financial products to democratize financial services, according to analysts at BOB Capital Markets.

Eventually, JFS’s valuation will depend upon clarity on regulatory capital to be deployed for identified business and the holding company discount on the value of RIL’s stake above regulatory capital requirements. While RIL’s entire shareholding may not be considered as regulatory capital, we assume that JFS will able to leverage this stake to raise the mandated funds. Until the business model evolves, we prefer to value the company in line with RIL’s marketable treasury stock, the brokerage said in an update.

Analysts value JFS at Rs 161/share, which is 1x RIL’s treasury stock valuation of Rs 1,087 billion or $13 billion. Post the demerger, RIL will not have a direct stake in JFS, with shareholding of the latter mirroring that of RIL.