Just one day before the release of the RIL Q1 results for FY24, Reliance Industries Ltd. (RIL) declared the record date for the demerger of Jio Financial Services on July 20, 2023. After this demerger, the value of RIL would increase while all of its financial operations will be transferred to Jio Financial Services Ltd, which holds a 6.1% interest in RIL. Therefore, Jio Financial Services will be valued at about 10,000 crore following the demerger.
According to stock market experts, Reliance share price has hit fresh life-time high of ₹2,802 apiece on NSE last week due to value unlocking and the uptrend is expected to continue as market is highly bullish on Jio Financial Services shares after listing on Indian bourses. They believe that buying Reliance shares is the best way to get Jio Financial Services shares at cheapest possible rate as the JFSL share price may skyrocket after listing. They said that Jio Financial Services listing price would be around ₹150 to ₹200 apiece levels and it may soon skyrocket as the stock is expected to witness subastantial trade volume. RIL has declared that Reliance shareholders would be awarded Jio Financial Services shares in 1:1 ratio after JFSL record date for demerger.
On why Reliance share price hit new life-time high last week, Avinash Gorakshkar, Head of Research at Profitmart Securities said, “Reliance share price is skyrocketing as Jio Financial Services demerger record date is falling next week on Thursday, 20th July 2023. As Reliance shareholders will get Jio Financial Services shares in 1:1 ratio, people are buying Reliance shares to get Jio Financial Services shares at cheapest possible rate.”
Gorakshkar said that comparing Jio Financial Services valuations with the number of equity shares to be floated in the market, Jio Financial Services share price is expected to open below or around ₹200 per share.
Rajesh Sinha, Sr. Research Analyst at Bonanza Portfolio said, “Reliance share price has touched their 52-week high levels on the back of fixing record date for demerger of its Reliance Strategic Investments Ltd., the financial services arm of the company. Reliance Industries rename the new entity as Jio Financial Services Limited (JFSL). Listing of JFSL is expected to be in the next 2-3 months. It is possible that listing date will be announced in RIL’s next AGM, the date of which has not yet been announced. JFSL owns 6.1% in RIL, which is valued at Rs.1.1tn. This would represent a substantial portion (~90%) of JFSL’s net worth. Excluding investments in RIL shares, JFS’s net worth would be ~Rs.100bn (around ₹10,000 crore). As per street estimates, JFSL will list at price of ₹150-190 per equity share.”
JFSL is a financial services undertaking with investments in 6 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.
“Demerger decision is basically taken to keep financial service business distinct from other businesses and may attract a different set of investors, strategic partners, lenders and other stakeholders. Post demerger, aim is to lend to consumers and merchants based on proprietary data analytics and eventually branch out to insurance, payments, digital broking and asset management,” Rajesh Sinha of Bonanza Portfolio said.
On why people are crazy for Jio Financial Services shares, Avinash Gorakshkar said, “Market is expecting that JFSL would be a consumer lending behemoth as it has around 45 crore Jio phone users and around 18,000 Reliance Retail stores where they can add merchants to their new financial venture. However, I would like to point out two big appointments of KV Kamath and Hitesh Sethi. These two have lending expertise but in various capacity, KV Kamath can play up the role to find out lending business while Hitesh Sethi can implement that vision via technology. So, the Jio Financial Services Ltd will be a tech enabled financial company that will tap consumer and MSME lending.”
Gorakshkar went on to add that through JFSL demerger, RIL has started its value unlocking plans and market is expecting listing of Reliance Retail and Reliance Jio in medium to long term on same pattern. As these new upcoming companies would have the same face value that RIL has garnered, long term investors should buy Reliance shares to reap the value unlocking benefit getting showered on the existing shareholders of the blue-chip company.
