Billionaire Mukesh Ambani-led Reliance Industries has received a green light from its shareholders and creditors for the demerger of its financial services arm- Reliance Strategic Ventures. Nearly 100% of the votes cast were in favour of the resolution and the arm will be renamed as Jio Financial Services after the demerger.
Reliance Industries had approved the demerger in October 2022 and Veteran Banker KV Kamath will be the non-executive chairman of the demerged entity.
“JFS is uniquely positioned to capture multiple growth opportunities in financial services bringing millions of Indians into formal financial institutions,” said Ambani last year while announcing the demerger.
According to a report by CNBC TV-18, shareholders of Reliance Industries will receive one share of the demerged entity for every share held by them in the parent company. Following the demerger, the shares of Jio Financial Services will be listed on the Bombay Stock Exchange (BSE) as well as the National Stock Exchange (NSE).
In order to provide sufficient regulatory capital for lending to consumers and merchants, Jio Financial Services will acquire liquid assets (including treasury shares) from Reliance Strategic Ventures. During the next three years, Jio Financial Services will also incubate other financial services verticals, including insurance, payments, e-broking, and asset management.
The company currently carries on the financial services business through its subsidiaries and joint ventures. However, it believes that further growth and expansion of the business would require a differentiated strategy aligned with its industry-specific risks, market dynamics and growth trajectory. A financial services company can unlock the assets of the demerged undertaking for Reliance Industries shareholders and have higher leverage for expansion.
Global brokerage firm Macquarie believes that Jio Financial Services will be valued at more than Rs 1.52 lakh crore and become the fifth largest financial services firm in India.
Meanwhile, Jefferies believes that the demerged entity will get listed by September this year and focus on consumer & merchant lending & non-lending businesses. The brokerage expects Jio Financial Services to contribute ₹ 134 – ₹ 224 in the parent company’s price target of ₹ 3,100. The firm has ascribed a base case valuation of ₹ 179 for the demerged entity.
Jio Financial Services reported a turnover of ₹ 1387 crores as of March 31, 2022. It has investments in six companies — Reliance Industrial Investments and Holdings Limited
(RIIHL), Reliance Payment Solutions, Jio Payments Bank, Reliance Retail Finance, Jio Information Aggregator Services and Reliance Retail Insurance Broking.
Written by Simran Bafna
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