Mumbai: Jio Financial Services fell 5% on debut Monday amid expectations of a flood of sale orders from passive funds which can’t hold the shares anymore. But the company is confident of making strides in lending business with the best of technology.
The shares which listed earlier than anticipated fell to ₹251.75 on the BSE, giving it a market value of ₹1.6 lakh crore, after opening trade at ₹265 apiece. The company, which has multiple lines of business in finance, was spun off from Reliance Industries.
“Jio Financial services will seek to optimise all that India provides,” said chairman KV Kamath at the listing. “There are some advantages to being a little late to the party, because you then have the advantage of riding on all the technological developments which are already visible and optimising them to the fullest extent.”
Reliance’s Jio joins the likes of financial services conglomerates Bajaj Finserv and Aditya Birla Capital to cater to the soaring demand for loans from individuals and merchants. It would also provide services such as insurance broking and investment products through a mutual fund.
“It aspires to be a leading NBFC by focusing on five critical pillars: product portfolio, customer strategy, technological capabilities, liability strategy and people strategy,” said Prakar Sharma, an analyst at Jefferies.
The stock exchange derived price was ₹262 apiece. But investors expect the price to fall further as passive index funds sell their holdings, which they received for their ownership in Reliance Industries shares, to stay within their mandate of owning index stocks only. Since Jio may not be part of the index that the funds track, passive funds cannot hold them anymore.
Global index aggregator FTSE Russell will exclude Jio Financial from the FTSE All-World index and other three global indices from August 22, while Nifty 50 and Sensex will exclude the stock on August 24. Analysts say that dropping Jio Financial could lead to an outflow of $450 million from the passive funds.
“As per business valuation and discount of the holding company, the stock can trade around ₹170 to ₹220 levels in the short term,” said Ravi Singhal, CEO of GCL Broking. “As the company holds treasury shares, it will help it to get cash and increase the book value in the long term.”
The company will have at least six subsidiaries that would lend to retailers, merchants, sell insurance and payments bank services in joint venture with the State Bank of India.
Furthermore, it recently formed an equal joint venture with the world’s biggest fund manager BlackRock to offer mutual fund services with an investment of $300 million.
Jio’s balance sheet was ₹1.1 lakh crore with ₹67,100 crore worth in Reliance Industries shares, and preference shares in associate companies worth ₹17,600 crore.
