Reliance Demerger: Jio Financial Services valued at ₹261.85

Today 20th July, Reliance Industries Limited (RIL) successfully executed its demerger plan, separating its subsidiary Strategic Investments Limited (SIL) to form Jio Financial Services (JFS). 

SIL will be renamed and listed on stock exchanges at a later date. As of now, JFS is not tradable and will be included in the Nifty 50 index with a constant price until the listing date is officially announced.

The demerger scheme entitles shareholders to receive one share of the new entity, Reliance Strategic Investments (RSIL), for every share of RIL held. With the demerger, JFS has been valued at an impressive ₹261.85 per share during a special session on the National Stock Exchange. 

This valuation has surpassed analyst expectations, who had initially estimated its worth to be between ₹125 to ₹225 per share. This higher valuation is attributed to Jio Financial Services' ownership of approximately 6% of Reliance Industries' treasury shares.

Following the demerger, RIL stock price has settled at ₹2589 per share on the Bombay Stock Exchange (BSE), showing a decline from its previous close at ₹2853 per share. 

Despite this drop, the key benchmark indices in India, Nifty, and Sensex, may not necessarily fall significantly. JFS (Jio Financial Services) will be listed as the 51st share on the Nifty 50 index,  and its weight will be adjusted accordingly. This adjustment ensures that the combined weight and price of Reliance plus JFS remain equivalent to Reliance's weight and price as of the previous day's closing.

Investors are advised to be patient, as the new stock, JFS, is not yet tradable and will remain in the Nifty 50 index at a constant price until the official listing date is announced. Three days after the stock lists as a separate entity, JFS will be removed from the Nifty 50 index, and Reliance's weight in the index will be adjusted back accordingly.

This restructuring process will not only affect the Nifty 50 index but also all other indices that Reliance was a part of. Investors should keep an eye out for the announcement of the allotment and listing date of Jio Financial Services (JFS) for further trading opportunities and potential price fluctuations.

Overall, the demerger of SIL into Jio Financial Services marks a significant step for Reliance Industries and presents new opportunities for investors in the evolving financial landscape.

Why the demerger?

The Ambani family chose to demerge JFSL into a separate entity to create a specialized strategy for the financial services business. The nature of this industry is distinct from RIL's other businesses, and the demerger allows JFSL to have higher leverage for growth. Shareholders see it as a value-unlocking exercise.