Reliance Sets July 20 as Record Date for Jio Financial Demerger

Reliance Industries Ltd (RIL), under the leadership of billionaire Mukesh Ambani, has recently revealed the record date of July 20 for the demerger of its financial services subsidiary, Reliance Strategic Investments (RSIL). The subsidiary will be rebranded as Jio Financial Services (JFSL) in the future. Regulatory approval for the demerger was obtained last month, paving the way for this strategic move. The main objective behind the demerger is to unlock value for the extensive shareholder base of RIL, which stands at 36 lakhs and makes it the largest company in India in terms of market capitalization.Under the demerger scheme, shareholders of RIL will be entitled to receive one share of Jio Financial for each share held in RIL. Notably, the stock has already witnessed a 13% increase over the last three months, indicating positive market sentiment. The announcement also included key appointments within JFSL, with Hitesh Sethia, previously associated with McLaren Strategic Ventures, being named as the CEO and MD of RSIL for a period of three years. Isha Ambani, the daughter of Mukesh Ambani, has been appointed as a non-executive director of the financial services company, pending approval from the Reserve Bank of India (RBI). In addition, Rajiv Mehrishi, the former union home secretary, and Sunil Mehta, the former MD and CEO of Punjab National Bank (PNB), are set to join JFSL as independent directors. The roadmap for JFSL's future plans is anticipated to be unveiled during RIL's upcoming annual general meeting (AGM), which will precede the listing of JFSL on stock exchanges. JFSL aims to become one of India's leading financiers and will directly compete with prominent players like Paytm and Bajaj Finance. Various brokerage firms have estimated Jio Financial's share price. The combined net worth of the demerged entity is valued at Rs 280 billion, including a 6.1% stake in RIL. JFSL is expected to capitalize on its investments for growth and foster the development of other financial services businesses. The subsidiary currently holds investments in six companies, namely Reliance Industrial Investments and Holdings, Reliance Payment Solutions, Jio Payments Bank, Reliance Retail Finance, Jio Information Aggregator Services, and Reliance Retail Insurance Broking. Centrum Broking has assigned a value of 3-5x P/BV to JFSL's core net worth and a 30% holding company discount for investments in RIL, resulting in a price range of Rs 157-190 for JFSL. After the demerger, the promoter's ownership in JFSL will amount to 49.11%.The decision to demerge the financial services arm reflects the distinctive nature and competition within the financial services industry, which can attract a diverse range of investors, strategic partners, lenders, and stakeholders.