Reliance Industries - Jio Financial Services demerger: Shares of de-merged Reliance Industries (RIL) were discovered at ₹2,580 on NSE and ₹2,589 on BSE after the special pre-opening session organized by the bourses, down 10 percent from the previous close of RIL at ₹2,853.
However, in a surprise, RIL's NBFC unit Jio Financial Services' price came out to be ₹261.85 per share, beating estimates of up to ₹170.
However, after RIL resumed trading post 10 am, the stock rose 1.66 percent to settle the day at ₹2,622.75.
“The market discovered price of ₹261.85 per share of Jio Financial Services has come much higher than most brokerages’ estimates. This high price is a reflection of the market’s assessment of Jio Financials’ potential. The wide reach of JFSL through RIL’s other business segments like Reliance Retail has the potential to grow the company at a fast pace for many years to come. The market is discounting this potential,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
A special pre-open session was held for RIL and RSIL from 9 am to 10 am, during which RIL shareholders could only buy or sell the RIL stock. One must note that Jio Financial Services stock will remain as a 51th Nifty constituent at this constant price till listing. It will not trade yet. The listing date has not been announced yet. The stock will be removed from Nifty 50, three days after it lists.
This price has been derived from the difference between RIL's closing price of ₹2,853 on Wednesday, July 19, and its price during the special pre-open session (SPOS) today, July 20.
Meanwhile, RIL also turned ex-date today for the financial services business's demerger and today is also the record date for the same.
In this demerger, RIL will allot one share of Reliance Strategic Investments Limited (RSIL) for every one RIL share to shareholders, whose own RIL shares as of today. RSIL will be later renamed Jio Financial Services.
In an exchange filing today, the company informed investors that the post-demerger cost of acquisition of RIL share is 95.32 percent and Reliance Strategic Investments Limited share is 4.68 percent. RSIL will be renamed as Jio Financial Services later.
"You are advised to apportion your pre-demerger cost of acquisition of equity shares in the company in this manner," said the exchange filing.
Thus, brokerage house Centrum used the standalone net worth of RIL of ₹5 lakh crore and an apportionment ratio of 4.68 percent of RSIL to arrive at a net worth of RSIL of ₹23,500 crore.
"As part of the scheme, RIL will transfer its investment in Reliance Industrial Investments and Holdings Ltd (RIIHL) to JFSL. RIIHL is the ultimate beneficiary of 6.1 percent of RIL shares. Over the past few months, investors had questions on whether the 6.1 percent treasury shares in RIL will be transferred at Book Value or Market Value. The net worth of ₹23,500 crore, suggests that the transfer will be at the Book Value," it said.
Please note, that the effective date of the scheme is July 1, 2023, so this ratio will be calculated on the standalone balance sheet as on 30th June’2023. Since RIL has not reported its Q1FY24 results yet, we have based our calculation on net worth as of 31st March 2023, informed Centrum.
