Reliance’s financial unit valued at over $20 bn

JFSL, the demerged financial services unit of Reliance Industries, was valued at over $20 billion, ahead of Adani group firms, Coal India and Indian Oil.

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

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

At ₹261.85 apiece, the entire share capital of JFSL will be valued at ₹1,66,000 crore or over $20 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 shares will become available for trading in stock exchanges in the near future.

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

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

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.

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