All you need to know about RIL-Jio Financial demerger

All you need to know about RIL-Jio Financial demerger

Muskan
July 20, 2023
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All you need to know about RIL-Jio Financial demerger


Reliance Industries Ltd (RIL), the oil-to-telecom conglomerate led by Mukesh Ambani, has announced a demerger of its financial services undertaking into a separate entity called Reliance Strategic Investments Limited (RSIL), which will be renamed and listed as Jio Financial Services Limited (JFSL). This move is seen as a value unlocking opportunity for RIL shareholders, who will be rewarded with one share of JFSL for every share of RIL they own. Here are some key points to know about this demerger:

- Record date: The record date for the demerger is July 20, 2023, which means that the investors who want to be eligible for the JFSL shares must own RIL shares before that date. The last date to buy RIL shares for this purpose is July 19, 2023.

- Effective date: The effective date of the scheme is July 1, 2023, which means that the financial services undertaking of RIL will be transferred to RSIL from that date.

- Share allotment: RSIL will issue and allot one fully paid-up equity share of Rs 10 face value for every one fully paid-up equity share of Rs 10 face value of RIL to the shareholders of RIL as on the record date. The shareholders of RIL holding equity shares in physical form are requested to send their details to the Registrar and Transfer Agent of RIL (Kfin Technologies) no later than five working days before the record date.

- Price discovery session: To facilitate an efficient price discovery mechanism on the demerger record date, both BSE and NSE will conduct a special price discovery session for RIL shares from 9 am to 10 am on July 20. The price discovered in this session will be used to determine the opening price of RIL shares (excluding the financial services business) on the next trading day.

- Valuation: The valuation of JFSL is estimated at around Rs 1 lakh crore by various brokerage firms, based on the treasury stock valuation method. This implies a share price of around Rs 160-190 for JFSL. RIL's share price is expected to be least impacted by this demerger and may see an upside of 3-5%.

- Business model: JFSL is expected to focus on the non-banking financial company (NBFC) and credit market segments and has plans to foray into insurance, digital payment, and asset management verticals. The details of its business model are yet to be announced by the company.

- Management: JFSL will be headed by Hitesh Kumar Sethi as the MD and CEO, who is a former ICICI executive with over 25 years of experience in banking and financial services. Isha Ambani, Mukesh Ambani's daughter, will join the board of JFSL as a non-executive director.

- Listing: The listing date of JFSL is not yet announced, but it is expected to happen in the next 2-3 months. The details could be announced in RIL's annual general meeting (AGM), which is likely to be held in August.

- Rationale: The demerger of JFSL is seen as a strategic move by RIL to unlock value for its shareholders and create a separate entity that can leverage its digital platform and customer base to offer a range of financial products and services. It will also enable RIL to focus on its core businesses of oil and gas, petrochemicals, retail, and telecom.

- Impact: The demerger of JFSL is expected to have a positive impact on both RIL and JFSL shareholders, as they will benefit from the growth potential and synergies of both the entities. JFSL will also become the fourth largest financial institution in India by market capitalisation after HDFC Bank, HDFC Ltd, and ICICI Bank.

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Source: 

(1) Reliance Industries, Jio Financial Services demerger: 4th largest financial institution in India! From record date to ratio, check TOP 10 things. https://www.msn.com/en-in/money/topstories/reliance-industries-jio-financial-services-demerger-4th-largest-financial-institution-in-india-from-record-date-to-ratio-check-top-10-things/ar-AA1e1ghp.
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