Reliance spin-off Jio Financial valued at $20 bn, above estimates

Reliance spin-off Jio Financial valued at $20 bn, above estimates

Muskan
July 21, 2023
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Mukesh Ambani’s Jio Financial Services Ltd valued at $20 billion after spinoff


Mukesh Ambani, the chairman and managing director of Reliance Industries Ltd (RIL), has achieved another milestone in his quest to create a multi-purpose empire that can rival global giants like Alibaba and Tencent. His financial services unit, Jio Financial Services Ltd (JFS), has been valued at around $20 billion after its stock price was set at a much higher-than-expected 261.85 rupees on Thursday.

JFS is the demerged entity of RIL's financial services business, which includes segments such as payments, lending, insurance, wealth management and digital banking. The spinoff was announced last year as part of Ambani's strategy to unlock the value of his oil-to-telecoms conglomerate and attract global investors.

The valuation of JFS is impressive considering that it is a relatively new player in the Indian financial services market, which is dominated by established banks and fintech firms. JFS has leveraged the massive customer base and digital infrastructure of RIL's telecom arm, Jio Platforms, to offer a range of financial products and services to millions of Indians.

JFS has also partnered with leading global players such as Google, Facebook, Microsoft and Amazon to enhance its offerings and reach. For instance, JFS has collaborated with Google to launch a low-cost smartphone called JioPhone Next, which will enable millions of Indians to access digital services such as payments, e-commerce and entertainment. JFS has also integrated its payments app, JioMoney, with Facebook's WhatsApp, which has over 400 million users in India.

The spinoff of JFS will bring several benefits to both RIL and its shareholders. For RIL, it will help reduce its debt burden and focus on its core businesses of oil refining, petrochemicals and retail. For shareholders, it will create a new avenue for wealth creation and diversification. RIL has offered one share of JFS for every share owned by RIL's investors.

The listing of JFS will also mark a new era for the Indian financial services sector, which is undergoing rapid transformation due to digitalization, innovation and regulation. JFS will compete with other players such as HDFC Bank, ICICI Bank, Paytm, PhonePe and Zerodha for a share of the growing market. JFS will also have to deal with challenges such as cybersecurity, customer acquisition and retention, regulatory compliance and profitability.

JFS is expected to start trading on the stock exchanges at a later date, after completing the necessary formalities. The price discovery of JFS was done through a special session conducted by the exchanges for the first time in India, to minimize the impact on the benchmark indices. RIL carries about 11% weight in the Nifty 50 index.

The valuation of JFS reflects the confidence and optimism of the investors in Ambani's vision and execution. It also showcases the potential and opportunities of the Indian financial services sector, which is poised for exponential growth in the coming years.

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