In a groundbreaking hour-long special trading session, Jio Financial Services, a subsidiary of Mukesh Ambani’s Reliance Industries (RIL), achieved a staggering valuation of Rs 1.66 trillion, equivalent to $20 billion. This valuation exceeded analysts’ expectations, with shares priced at Rs 261.85 per share, surpassing the projected range of Rs 134-224 per share. The session’s outcome, driven by a unique pre-trade session, signifies a significant milestone for Jio Financial, positioning it as India’s 33rd most valuable company and the third-largest non-banking financial entity, just behind Bajaj Finance and Bajaj Finserv.
The Valuation Process
The valuation of Jio Financial was determined by calculating the difference between RIL’s closing price on Wednesday, July 19, which stood at Rs 2,840, and the price discovered during the unprecedented pre-trade session at Rs 2,580.
Jio Financial’s Impact on the Market
With its current valuation, Jio Financial is set to emerge as a prominent player in the financial landscape, ranking higher than most other banking companies. Moreover, the value assigned during the session exceeded that declared by RIL in its statement on Wednesday. According to the statement, the cost of acquisition for Reliance Strategic Investments, soon to be renamed Jio Financial Services, is 4.68 per cent, while RIL’s value amounts to 95.32 per cent. These figures bear significance for capital gains computation.
Unlocking Significant Value
G Chokkalingam, founder and head of research at Equinomics, believes that the demerger exercise will unlock substantial value. He considers the discovered price to be reasonable, with further potential for gains on the listing day. Although Jio Financial’s value as a percentage of its net worth is relatively lower compared to its NBFC peers, the platform’s association with Jio, the profile of its promoters, and prospects for backward and forward integration bode well for substantial value unlocking.
Attracting Investors and Partners
Financial analysts view the demerger as a strategic move by the conglomerate, allowing the new company to attract a diverse set of investors, strategic partners, and lenders with specific interests in the financial services sector. This spin-off aligns with Ambani’s broader objective of expanding beyond the oil business into thriving non-oil ventures, including retail, e-commerce, and now financial services.
The Listing Process
While RIL announced the demerger in October, the exact listing date for Jio Financial remains pending. Abhilash Pagaria, head of Nuvama Alternative & Quantitative Research, expects the listing to occur within a month. Given Jio Financial’s separation from a colossal entity like RIL, the listing process is likely to be expedited, aiming for a quick listing in a month or even less. However, it is worth noting that some recent demergers have taken considerably longer.
Notionally Part of Benchmark Indices
Until Jio Financial is listed independently, its shares will be notionally part of the benchmark Nifty and Sensex at a constant value of Rs 261.85. However, within three days of its listing, it will be removed from the indices, enabling exchange-traded funds to divest their holdings in Jio Financial.
Jio Financial’s valuation of $20 billion following the record trading session underscores its potential to become a significant player in India’s financial landscape. With strong support from the Jio platform, a robust pan-Indian network, and significant resources, the company is poised for substantial value unlocking. The demerger from RIL positions Jio Financial to attract diverse investors, partners, and lenders, in line with Ambani’s vision of expanding the conglomerate’s footprint in non-oil businesses.