Jio Financial Services holds a position in both the benchmark indices. However, it is slated to be delisted from both the Nifty and Sensex indices after the conclusion of the third trading day following its listing, which is scheduled for August 24.
In its debut trading session, shares of Jio Financial Services experienced a lower circuit, dropping by 5% to Rs 251.75 on Monday after being listed. The stock is set to be removed from both the Nifty50 and Sensex indices after a span of three days from its listing.
Upon its listing on Monday, shares of Jio Financial Services (JFS) encountered a lower circuit during their first trading session. The stock debuted at Rs 265 per share, representing a slight premium of over 1% compared to its derived price of Rs 261.85 on July 20, which marked the record date for the company’s demerger.
The overall market capitalization of Jio Financial Services underwent a correction, dropping below Rs 1.6 lakh crore from its initial value of over Rs 1.68 lakh crore at the commencement of trading. The stock has been categorized as a ‘T’ group security on the BSE, indicating that intra-day trading in the stock is restricted.
Eligible shareholders of Reliance Industries (RIL) were allocated JFS shares in a 1:1 ratio, meaning each Reliance Industries shareholder received one share of Jio Financial Services upon listing. Notably, the determined share price for JFS based on the corporate event’s record date surpassed the market’s earlier estimates, which had anticipated a share price in the range of Rs 160-170.
Jio Financial Services, the recently established and second-largest Non-Banking Financial Company (NBFC) in terms of market capitalization, is reportedly concentrating vigorously on lending to merchants and customers, leveraging its parent company’s extensive presence within kirana (local grocery) stores. As of the end of June, Reliance Industries boasted a substantial store count of 18,446, serving a customer base of 26.7 crore.
Currently enlisted in both benchmark indices, Jio Finance Services is slated to be excluded from the Nifty and Sensex indices after the conclusion of its third trading day on August 24, post-listing. It’s worth noting that this exclusion date might be subject to adjustment under certain circumstances. Abhilash Pagaria from Nuvama Institutional Equities has indicated the possibility of passive fund outflows affecting the counter.
CLSA, a brokerage firm, highlighted that apart from its stake in RIL (Reliance Industries Limited), assets worth $2.5 billion or approximately Rs 33 per share have been demerged into Jio Financial Services (JFS). This demerged amount could potentially support a loan portfolio of around $13-15 billion. The brokerage noted that even if JFS grows its loan book at a pace similar to the recent annual additions of the sector leader Bajaj Finance, it would take nearly three years to fully utilize this amount.
Most financial lending companies are traded at price-to-book ratios below 3, with the exception of Bajaj Finance and Chola, both of which exhibit return ratios exceeding 20%. CLSA pointed out that in order to achieve this, Jio Financial Services would need a profit after tax (PAT) surpassing $500 million. The presence of a substantial core loan portfolio would lessen the necessity for JFS to sell its stake in Reliance Industries in the near future.