As part of a massive value unlocking exercise that could be worth more than $20 billion for shareholders of Reliance Industries (RIL), shares of the recently-demerged company Jio Financial Services or JFSL will list on stock exchanges at 10 am today.
On both BSE and NSE, the stock with the symbol of JIOFIN will trade in the T Group segment for the first 10 days. The upper and lower circuit limit would be restricted to 5% which will restrict any major movement in the debutant.
JFSL’s listing ceremony will be hosted in the BSE campus but it is not yet known whether RIL chairperson and Asia’s richest billionaire Mukesh Ambani will be personally present to ring the bell. His daughter Isha Ambani has already joined the company’s board as a non-executive director.
While the stock was valued at Rs 261.85 per share during a special price discovery session on demerger record date of July 20, it is being expected that the NBFC stock could cross the Rs 300 mark per share on Day 1 itself.
At a pre-listing market capitalisation of Rs 1.66 lakh crore or $20.3 billion, Ambani’s new beast is already the 33rd most valuable company in India and 3rd largest NBFC after Bajaj twins – Bajaj Finance and Bajaj Finserv.
JFSL shares were credited to demat accounts of all eligible RIL shareholders on August 10 and will remain in frozen state till listing.
What should JFSL investors do after listing?
Arbitrage traders who bought RIL stock only as a special situation opportunity to get one JFSL share for every RIL stock owned are impatiently waiting to lock profits on listing day if they get a price higher than their initial investment in RIL. The upside could, therefore, be limited due to the selling pressure both from arbitrage traders as well as those RIL shareholders who don’t want an NBFC stock in their portfolio.
“RIL shareholders who have acquired Jio Financial shares due to the demerger should consider retaining them for an extended period. Jio Financial boasts a promising business model and is poised to leverage the escalating demand for financial services in India. However, potential investors should be aware that the stock might be somewhat illiquid at present, which could lead to short-term volatility,” Sonam Srivastava, Founder and Fund Manager at Wright Research, told ETMarkets.
While some analysts are optimistic due to the strong demand for financial services in India and the company’s robust parentage, others are more cautious. “Their reservations stem from the fact that Jio Financial is still in its nascent stages and hasn’t yet achieved profitability,” she said.
Apurva Seth of SAMCO Securities said investors shouldn’t expect miracles in the short to medium term. “Only investors who have a horizon beyond 5 years can consider holding on to the stock. Others are better off by exiting JFSL and entering a bank/NBFC with a fully functional business,” he said.
Long-term outlook
The long-term outlook for Jio Financial Services Limited (JFSL) is bullish due to its focused transition to an independent financial entity with interests spread across consumer and merchant lending, asset management, insurance, payments and digital broking.
JFSL has already announced a 50:50 joint venture entity with BlackRock to enter the mutual fund industry.
“BlackRock’s global fund management expertise combined with Jio’s technical prowess and expanding clientele could reshape India’s asset management industry, valued at Rs 44.3 trillion ($540.4 billion). Holding these stocks long-term could offer RIL shareholders an opportunity to benefit from the potential transformation of India’s asset management landscape,” said Anirudh Garg, Partner & Head of Research at Invasset PMS.
As the financial services industry already boasts of several established players, JFSL, which comes with a solid parentage, technology and financial backing, will still take its own time to set up businesses and make a dent on the competition.
