Index heavyweight Reliance Industries’ shares gained 4.65% on Monday’s intraday trades to hit a fresh 52-week high of ₹ 2,756.00. This happened after it decided to reduce the equity share capital held by its shareholders in Reliance Retail and announced the record date for the demerger of its financial services arm which will be renamed and listed as Jio Financial Services.
The oil-to-telecom conglomerate has fixed July 20, 2023, as the record date for determining the eligibility of shareholders entitled to receive the shares of its financial services arm Reliance Strategic Investments Limited (RSIL).
Under the scheme of allotment, Reliance Strategic Investments will allot one fully paid-up equity share of the face value of ₹ 10 each for every share of Reliance Industries as of the record date.
Experts expect that Jio Financial Services will be listed on the exchanges within the next 2-3 months. Market insiders expect the Ambani family to provide further details during Reliance Industries’ upcoming Annual General Meeting, the date for which has not been announced yet. Jio Financial Services is expected to become India’s fifth-largest financier in terms of capital and compete with the likes of Paytm and Bajaj Finance.
Jio Financial Services’ (JFS) net worth is estimated to be around ₹ 10,000 crores, excluding the investments in Reliance Industries’ shares.
“Assuming that the investments in RIL shares represent 90% of JFS’s net worth, the book value per share of JFS would be ₹ 190,” Motilal Oswal said. Meanwhile, JP Morgan has estimated Jio Financial Services’ share price at ₹ 189 and Jefferies estimated it at ₹ 179.
Reliance Industries‘ market capitalization crossed the ₹ 18 trillion mark once again. It has previously achieved this milestone in December 2022 and April 2022.
Foreign brokerage Macquarie said that Jio Financial Services will have a significant advantage over other non-banking finance companies (NBFCs) due to its deep-pocketed parentage, AAA credit rating, strong and well-capitalised balance sheet, large distribution footprint and strong ability to attract top-notch talent.
In another development, the company said that it will reduce the equity share capital held by shareholders in Reliance Retail Ventures. Accordingly, shares held by minority investors other than its promoter and the holding company Reliance Retail Ventures in the unlisted Reliance Retail Ltd shall be cancelled and extinguished. The company will pay investors ₹ 1,362 per share.
Global brokerage UBS has reiterated a buy rating on the company’s stock with a price target of ₹ 3,000 apiece, citing that capital reduction in Reliance Retail would improve its valuation.
Once the non-promoter capital is reduced, it will become a 100% subsidiary of Reliance Retail Ventures Ltd. Moreover, the consideration of ₹ 1362 per share is at a 54-60% premium as compared to its valuations obtained by two independently registered bodies by the brokerage
Morgan Stanley has maintained an overweight rating on the stock with a price target of ₹ 2,960 per share. In its report, it said that Reliance Retail has been valued at an enterprise value of $ 112 billion and the implied equity value will be $ 102 billion.
Written by Simran Bafna
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