Listing could see Rs 3,800 crore worth of selling by passive MFs
Mumbai, NFAPost: Shares of Jio Financial Services (JFS), which was demerged from Reliance Industries (RIL) last month, will get listed on stock exchanges on August 21 (Monday). During a price-discovery session on July 20, shares of JFS were valued at Rs 261.85 apiece, implying a valuation of Rs 1.66 trillion ($20 billion).
Experts believe the stock could top the Rs 300-mark.
“The stock could list at around Rs 300. If one excludes the treasury stock that the company owns, Jio Financial’s value as a percentage of its net worth is far lower than what non-banking financial companies (NBFC) peers command,” says G Chokkalingam, founder and head of research at Equinomics.
Between July’s price-discovery session and Monday’s listing, JFS has seen key developments — such as the launch of asset management ventures and the reported plans of a foray into the insurance sector. JFS has formed a joint venture with US-based asset manager BlackRock to enter the Indian asset management space.
JFS shares, however, will witness selling pressure from exchange traded funds (ETFs) and index funds.
JFS — which is currently a part of the benchmark Nifty50 and Sensex — will move out from both the indices three days after its listing. According to Nuvama Alternative & Quantitative Research, the exclusion will happen on August 24.
As a result of exclusion, passive mutual fund schemes tracking Nifty50 and Sensex, will have to offload their holdings in the stock. Nifty50 funds now hold around 90 million shares, while Sensex funds have 55 million, as per Nuvama. Their holding is worth around Rs 3,800 crore at the present price.
JFS shares were credited to the demat accounts of eligible RIL shareholders last week. As part of the demerger, RIL shareholders were allotted one share of Jio Financial for every one share held.
FTSE Russell, which had earlier planned to remove Jio Financial from its indices, announced on Friday that the stock will remain in all four of the indices it’s presently part of.
At the current valuation, JFS will be India’s 33rd most valuable company and the 3rd biggest NBFC, after Bajaj Finance and Bajaj Finserv. In the banking pack, only five lenders — HDFC Bank, ICICI Bank, SBI, Kotak Mahindra bank, and Axis Bank — are currently valued at more than Jio Financial’s valuation.
JFS holds 6.1 per cent stake in RIL, which is currently valued at Rs 1.08 trillion. RIL’s shares closed 0.51 per cent higher on Friday at Rs 2,551, making it the country’s most-valued firm at Rs 17.26 trillion.
Analysts believe the demerger was a masterstroke from the oil-to-telecoms conglomerate as it would help the new company attract different sets of investors, strategic partners, and lenders having specific interests in the financial services business. They believe the financial services spinoff furthers Chairman and Managing Director of RIL, Mukesh Ambani’s aim of making it big in the non-oil business. Besides telecom, the country’s largest conglomerate has large ambitions in retail, e-commerce, and now the financial space.
