Demystifying the Listing of JFS Shares: A New Growth Opportunity for RIL Shareholders

In a recent move that has garnered considerable attention in the financial sector, Jio Financial Services Ltd (JFS), the demerged financial business of Reliance Industries Ltd (RIL), made its market debut.

This move is expected to unlock value for RIL shareholders and provide them with a fresh avenue for growth. The JFS shares were listed at Rs 265 apiece on the Bombay Stock Exchange (BSE), marking a 1.18 percent premium over their discovered price of Rs 261.85 apiece on July 20th.

The Exciting Journey of JFS Shares

  1. Listing at a Premium: The listing of JFS shares at a premium signifies the positive market sentiment and investor confidence in the demerged entity.
  2. Intraday Movement: Following the listing, the stock experienced dynamic intraday movements, reaching a high of Rs 278.20 and a low of Rs 253.30 within the initial five minutes of trading. On the National Stock Exchange (NSE), the scrip was listed at Rs 262 apiece.
  3. Market Capitalization: The listing propelled JFS’s market capitalization to a significant Rs 1,68,362.03 crore, highlighting the substantial scale of this financial venture.
  4. Share Allocation to RIL Shareholders: JFS shares were allocated to eligible shareholders of RIL in a 1:1 ratio, underscoring RIL’s commitment to ensuring shareholder value and participation in the new growth journey.
  5. Surpassing Street Estimates: The discovered share price for JFS surpassed the Street estimates, defying projections that hovered around the range of Rs 160-170 per share.

Unveiling the Potential: JFS’s Strategic Position

  1. Asset Demerger: Apart from owning a stake in RIL, JFS now possesses liquid assets valued at $2.5 billion, which amounts to Rs 33 per share. These assets can support a substantial loan book estimated at $13-15 billion.
  2. Loan Book Prospects: Analysts at CLSA predict that JFS’s loan book growth could parallel sector leader Bajaj Finance’s annual pace, indicating a potential loan book utilization period of around three years.
  3. Return Ratios and Core JFS: While most lending financials trade below 3 times price-to-book ratio, core players like Bajaj Finance and Chola stand out with return ratios exceeding 20 percent. Achieving a PAT of over $500 million will be pivotal for core JFS to align with these benchmarks.

Impacts and Strategies

  1. Index Realignments: JFS’s inclusion in key domestic benchmark indices for the initial three days will be followed by its removal, necessitating strategic adjustments from passive funds.
  2. Ownership Transition: CLSA’s India-focused portfolio, due to its ownership of RIL, shares a connection with JFS. However, CLSA plans to exit JFS ownership within the first 30 minutes of weighted average price.
  3. Long-Term Prospects: A robust core book will potentially reduce the urgency for JFS to divest its Reliance Industries stake in the immediate future.

Evolving Dynamics and Projections

  1. Removal from Nifty and Sensex: JFS’s exit from Nifty and Sensex, scheduled for August 24, could lead to passive outflows.
  2. Potential Passive Selling: In the hypothetical scenario where JFS hits Rs 261.8 per share, passive trackers could potentially sell around 9 crore shares in Nifty and 5.5 crore shares in Sensex.
  3. Exclusion Criteria: Exclusion from indices could be deferred in specific scenarios, while exclusion shall occur after the third trading day of observation without hitting the price band.

Navigating Recent Developments

  1. Key Demerger Date: July 20 marked the record date for the demerger of RIL’s financial services business, resulting in the discovered price for JFS.
  2. Delisting and Value Assignment: Jio Financial’s delisting from FTSE Indices, alongside its gradual removal post trading initiation, will redefine the perception of JFS shares.

Conclusion

The listing of JFS shares at a premium and their subsequent market performance have set the stage for a promising growth journey. As JFS embarks on its trajectory as an independent entity, RIL shareholders have a unique opportunity to participate in this financial venture’s success.

The financial sector is abuzz with anticipation as JFS navigates the evolving market dynamics, opening new avenues for investors and propelling the sector forward.


FAQs

  1. What is the significance of the premium listing of JFS shares? The premium listing of JFS shares indicates a positive market sentiment and investor confidence in the demerged entity.
  2. How does JFS’s loan book potential compare to industry leaders? JFS’s loan book has the potential to match the growth pace of sector leader Bajaj Finance, projecting utilization over approximately three years.
  3. What impacts will JFS’s removal from indices have on passive funds? JFS’s exclusion from indices could trigger passive outflows, leading to strategic adjustments by passive funds.
  4. Why is CLSA planning to exit JFS ownership despite its RIL connection? CLSA aims to exit JFS ownership within the first 30 minutes of weighted average price due to strategic considerations.
  5. What is the key takeaway from JFS’s delisting from FTSE Indices? JFS’s delisting from FTSE Indices, marked at zero value, will reshape perceptions of the company’s shares in the market.

also read https://dailynews07.com/russias-recent-lunar-mission-failure/#more-375

Leave a comment