The group aspires to foray into non-lending financial businesses like life/ general insurance and AMC where it can even take the inorganic route and benefit from recent regulatory change that allows banks to have up to nine insurance partners.

Mumbai:

Jio Financial Services Ltd (JFSL), the demerged financial services unit of Reliance Industries Limited(RIL), was valued at about USD 21 billion, ahead of Adani group firms, Coal India and Indian Oil.

JFSL’s stock was priced at Rs 261.85 based on the difference between Reliance’s stock price at Wednesday’s close of Rs 2,841.85 and Rs 2,580, its price at the end of an hour-long special pre-market session.

Reliance had earlier announced the demerger of its financial services undertaking into RSIL (Reliance Strategic Investments Ltd), which was renamed as JFSL (Jio Financial Services Ltd).

The RIL is all set to venture into insurance-both life and non-life- via JFSL. The finer details of the RIL’s plan about its forthcoming foray into insurance and asset management, is likely to be unveiled shortly.

Reliance, India’s most valuable company, will now trade on exchanges without its financial services unit.

At Rs 261.85 apiece, the entire share capital of JFSL will be valued at Rs 1,72,000 crore or over USD 21 billion.

This valuation will put JFSL as India’s 32nd most valuable company by market capitalization ahead of the likes of Adani Ports, Adani Green, Tata Steel, Coal India, HDFC Life, IOC, and Bajaj Auto.

JFSL is an RBI-registered non-deposit-taking systemically important (ND-SI) non-banking financial company. Reliance has been developing and fostering a vibrant digital led-financial services platform through various digital applications. JFS also plans to launch a consumer and merchant lending business based on proprietary data analytics to complement and supplement the traditional credit bureau-based underwriting.

The focus of JFSL will be to go for new technology. RIL will completely go for digital distribution platform, which promises wide reach with a minimal cost involved.

Global brokerage Jefferies expects JFSL’s first port of call could be consumer, lending (especially electronics) & merchant financing.

It said, “JFSL’ key advantage will be low funding cost/ better access on the back of the group’s high credit rating and ownership per cent stake in RIL.”

Also, it added that the group aspires to foray into non-lending financial businesses like life/ general insurance and AMC where it can even take the inorganic route and benefit from recent regulatory change that allows banks to have up to nine insurance partners.

JFSL has already appointed KV Kamath (earlier CEO of ICICI Bank) as its Chairman and Hitesh Sethia as the CEO.

Sethia was involved with setting up and scaling operations as a key member of the set-up team for lClCl Bank in Canada and as the first employee of lClCl Bank in Germany. He also held senior and country head positions for the IClCl Bank’s operations in the UK and Hong Kong. In his last role at the bank, he was Head of Transaction Banking based in Mumbai.

In a recent note, Macquarie said that after the demerger Jio Financial Services (JFS) could be the fifth-largest financial services company in terms of net worth.

“JFS can be a real threat to fintech business models as well as NBFCs, in our view. JFS not only can offer attractive rates in merchant lending and digital unsecured lending markets, but also be reasonably competitive in the secured lending market eventually, in our view,” Macquarie said in the note.

JFSL shares will become available for trading in stock exchanges in the near future.

The price arrived at JFSL is higher than analysts’ estimates of Rs 160 to Rs 190.

Shareholders will get one JFSL share for each Reliance share they hold.

Reliance is the largest private player in the refining, petrochemical, E&P, digital and organised retail sectors in India. While its refining complex in Jamnagar is the largest in the world and among the most complex, it is also among the largest integrated petrochemical producers globally.

Its consumer business (Jio and Retail), which has scaled up over the last 4-5 years, is estimated to contribute half of total EBITDA by FY25, thereby replacing the oil to chemical business, which dominates EBITDA contribution.

Reliance aims to progressively transition to green hydrogen from grey hydrogen by 2025. It plans to launch an FMCG business in its retail division to develop and deliver.

While the effective date of the demerger has been fixed as July 1, July 20 has been fixed as the record day for allocating shares of the new company, according to the company’s stock exchange filing.

The spinoff, which will create the fifth-largest financier in terms of capital and compete directly with the likes of Paytm and Bajaj Finance, will complement Reliance’s consumer businesses, which include India’s largest wireless operator with about 428 million users, a top retail chain with over 17,000 stores.

According to brokerage BofA Securities, by separating financial services from the core business, Reliance appears to be keeping arm’s length transactions from other entities, and in theory helping them better to attract strategic or JV partners who are keen only in the financial services arm – like what they did with Reliance Jio or tower InvIT.