RIL-Jio Financial Services demerger tomorrow - should you buy the stock today? (2024)

Reliance share price hit fresh 52-week high of ₹2,845.00 apiece on BSE on July 19 due to value unlocking and according to stock market experts 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 substantial 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.

Also read: How the RIL-Jio Financial Services demerger will take place - explained

As a result of this demerger, the share price of RIL will need to be adjusted accordingly. On the morning of July 20, 2023, which is a Thursday, a special price discovery session will take place for RIL. This session will help determine the adjusted share price of RIL after the demerger of Jio Financial Services.

"How will it work? To use an example,

a) During the special session on Thursday, RIL is trading at ₹2,600.

b) The closing price of RIL on Wednesday was ₹2,800.

c) After the demerger, the spun-off business JFS (Jio Financial Services) will have a separate listing and its stock price will be set at ₹200 ( ₹2,800-2,600)

Jio Financial will be added in the indices, including Nifty 50, at a price of Rs. 200 per share. It will remain in the indices at this constant price of Rs. 200 until Jio Financial is officially listed as a separate entity. As a result, temporarily, Nifty 50 will have 51 stocks.

Once Jio Financial stock is listed on a future date, it will be removed from the indices three days after its listing, subject to certain price conditions. For example, if Jio Financial lists on day T, it will be delisted from the indices at the end of T+3 days," explains Pravesh Gour, Senior Technical Analyst, Swastika Investmart.

Jio Financial Services share fuels Reliance share price

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 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.

Jio Financial Services valuations

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.

Why market is bullish on Jio Financial Services shares?

"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.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Published: 15 Jul 2023, 09:23 AM IST