Reliance-Jio Financial demerger: what you need to know

Reliance IndustriesIndia’s most valuable company, will spin off its financial services business on Thursday as part of a move to unlock value.

Local stock exchanges will be held on Thursday holding a Private “Discover Price” session For the first time ever to determine the value of shares of Jio Financial Services.

Five analysts estimate that Reliance’s Jio Financial Services will be valued at Rs 160-190 per share.

Shares of Reliance are up 8 percent since the company announced the record date for its demerger on July 8. The stock is up 11.6 percent so far this year, outperforming the 9.5 percent rise in blue-chip Nifty 50 stock.

What happens to reliable stock on Thursday?

The National Stock Exchange and Bombay Stock Exchange will hold a ‘pre-opening auction’ session for Reliance on Thursday between 9:00 am to 10:00 am IST (0330-0440 GMT), with Wednesday’s closing level of Rs 2,841.85 as the reference price.

The fixed share price of Jio Financial Services will be determined by calculating the difference between the last closing Reliance and the share settlement price at the end of the special session.

Then Reliance shares will be trading at the new price of all existing indices on Thursday. However, Jio Financial Services shares will be listed on indexes, including the Nifty 50 preferred stock holder, but will not trade until listed.

It is widely expected that the listing date of Jio Financial Services will be announced at Reliance’s upcoming annual general meeting.

Rules for listing a new index for neglected companies

the The NSE in April changed the rules for how separate companies can be listed in indexes to reduce the momentum in its components.

All newly included entities were previously excluded from the indexes and, in cases of fixed-component indexes, replaced by another eligible stock.

Under the new rules, any newly listed spin-off businesses will initially be included in the indexes at a fixed price—the difference between the spin-off company’s closing price the day before the previous spin-off date and the price during the special pre-opening session on the prior spin-off date.

The separate entity will be removed from the index at the end of the third day of listing.

separation

Reliance announced last October that it would spin off and incorporate its own financial services company — Reliance Strategic Investments — which would be renamed Jio Financial Services (JFS).

Reliance shareholders will receive 1 share of Jio Financial Services for owning 1 share of Reliance.

Company developed July 20th as the class record dateor the cut-off date used to determine eligible shareholders.

Veteran banker KV Kamath will be the Non-Executive Chairman and former ICICI Bank CEO Hitesh Sethia will be the CEO.

Analysts believe that JFS’s access to massive amounts of data and Reliance’s possession of a non-bank finance company license will help the company start lending. Macquarie Research also said the company “has the potential to be an AAA-rated entity that can borrow at attractive rates.”