Post demerger of Indian billionaire Mukesh Ambani’s Reliance Industries, the Jio Financial Services (JFS) has been valued at around $20 billion on Thursday. At the valuation of $20 billion, the Jio Financial will be one of the top-40 Indian companies by market capitalisation. The list is headed by Reliance at $233 billion.
However, its stock price was set at a much higher-than-expected Rs 261.85 ($3.19).
Yesterday, at the end of a special trading session on stock exchanges for the price discovery of Reliance Strategic Investments Limited (RSIL), the market has assigned a price of Rs 261.85. It is to be noted here that the RSIL houses the financial services business of the Reliance group which will shortly be renamed as Jio Financial Services (JFS).
Jio Financial Services shares made a stronger debut, and the stock market experts are highly bullish on Dalal Street. The experts anticipate JFSL to be a pure financial company that will be in lending, investing and other financial business.
The NBFC story
By utilizing granular customer information and Reliance’s market reach, the JFSL aims to become a formidable competitor to existing players in the NBFC and fintech sectors.
As per the current arrangements, Reliance Retail Finance, an NBFC, primarily supports the group’s extensive retail operations in segments like grocery, consumer electronics, and fashion. Its business model centers around financing consumer durables through the EMI model.
While JFS may not secure a banking license due to regulatory restrictions on corporate groups, it can leverage its existing NBFC licence for consumer and merchant lending.
Why the JFSL spin-off?
The growth and expansion of financial services business required a set of differentiated strategy. Considering this fact, it was decided to carve it into a separate entity.
This demerger will also allow JFSL to enjoy a higher leverage compared to the RIL for its growth. For shareholders, it is being seen as a value unlocking exercise.