Jio Financial Services Listing: Here's All You Need To Know

Jio Financial Services Ltd., the Reliance Industries' fintech business, is all set to list on the Indian exchanges on Aug. 21

The board, last year, approved a scheme of arrangement among RIL, Reliance Strategic Investments Ltd. and their respective shareholders and creditors to demerge its financial services undertaking into Reliance Strategic Investments.

The special pre-open session for the demerger of the Reliance Industries resulted in Jio Financial Services Ltd. being ascribed a value of Rs 261.85 per share. Since the shares were not transferred to the eligible RIL shareholders and exchanges permission pending, the JFS stock remained in the benchmark indices Nifty 50 and BSE Sensex as a dormant stock.

RIL continued to trade in a normal market after adjusting for the demerger of the financial services business.

Starting Aug. 21, JFS will be retained in the index for three days for trading. The RIL's financial services arm will remain in the indices at constant price, which is the difference between RIL's closing price the day before the demerged entity started trading separately, and the price derived during special pre-open session.

According to exchange regulations for listing companies through scheme of arrangement and index reconstitution rules, JFS will have a pre-open session between 9:00 am and 9:45 am for price discovery. The stock will resume normal trade from 10:00 am onwards.

 JFS will only be removed from the indices after the end of third day. In case the share price hits the circuit on both first two days, then exclusion will be deferred by another three days. 

After two consecutive days of JFS not hitting the price band, it be removed from the indices after the third trading day even if it hits the price band on the last day.

While the scheme envisages Jio Financial Services to mirror RIL shareholding, there will still be certain adjustments due to two trusts holding RIL shares.

The new company will not issue and allot its equity shares to two entities which held the treasury shares of the RIL. The treasury shares are held through a trust structure (Petroleum), the sole beneficiary of which is Reliance Industrial Investments and Holdings Ltd. This company will become the subsidiary of Jio Financial Services Ltd.

In the final shareholding, the RIL promoter group will hold 45.8%, the public including GDR holders will own 54.20% stake in Jio Financial Services.

Read more here.

The spinoff of Reliance Industries' digital fintech business is unlikely to unlock much value for the company, but it provides all its shareholders exposure to the fast-growing digital fintech industry.

And it will eventually create value for them. But what prompted the 1:1 demerger ratio? The answer lies in the diverse shareholder base of Reliance Industries.

Read the full report here.

Every shareholder of Reliance Industries Ltd. has been given a share in the ratio of 1:1, which means one share for every one share held.

Since there is a separation from an existing company and new shares are allotted to the investor based on the holdings in Reliance Industries, there has to be an apportionment of the total cost that has been incurred for the shares.

The key question now is the tax impact and the work required for the existing holdings of Reliance Industries as well as Jio Financial Services.

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At the derived value of Rs 261.85 after RIL went ex-Demerger, the company is valued at Rs 1.66 lakh crore or nearly $20 billion. The true value will be determined during the pre-open session and company will be valued based on its FY23 financials and assets that it carries. But what does the entry of a widely popular, well-capitalised and execution-focused participant mean for India's financial services space? Experts are divided on the potential outcome.

The first possibility is that Jio Financial Services becomes one among the many financial services ventures by conglomerates, which struggle to truly shine.

The other is that it will lead to quick consolidation in the space, with weaker companies struggling to sustainably price their services.

Read more here.