InvestorQ : Can you tell me how the divestment of Jio Financial Services into a separate listed company will add value to Reliance shareholders?
Dawn Cherian made post

Can you tell me how the divestment of Jio Financial Services into a separate listed company will add value to Reliance shareholders?

Mitali Bhutta answered.
4 weeks ago

It must be said to the credit of Reliance that they have the art of tapping the mindset of investors. In the September quarter, despite a weak quarter in terms of O2C performance, the narrative has suddenly focussed on the divestment of Jio Financial Services into a sperate listed entity. During the quarter, the O2C business had trouble at multiple points. On the one hand, the O2C business was hit by falling gross refining margins (GRM). At the same time, the oil refining and chemicals business took a hit of Rs4,500 crore due to the imposition of the special additional export duty (SAED). Jio Finance story saved the day.

At the results announcement, Reliance also announced that it would hive off its financial services unit (Jio Finance) into a separate entity and it would also be listed in on the stock markets. In terms of the swap ratio, the existing shareholders of Reliance Industries would get shares in the ratio of 1:1 for their holdings in Reliance Industries. If you look at the scheme of arrangement approved, Jio Financial Services Ltd would be demerged from Reliance Industries with the same par value of Rs10. RIL shareholders will have an entitlement ratio of 1:1 for each share held by Reliance Industries.

Jio Financial Services was formerly called as Reliance Strategic Investment Ltd and is a wholly owned subsidiary of Reliance Industries. It is an investment *** financial services company and also holds a stake in Reliance Industries. Reliance Strategic Investments Ltd is currently an RBI registered non-deposit taking but systemically important (ND-SI) non-banking finance company (NBFC). Going back a bit into history, at the time of the separation of the group in the year 2005 into the MDAG and the ADAG segments, the entire financial services business was given to the ADAG group. RSIL will mark the MDAG Fintech foray.

For the group, Jio Financial Services will enable a large digital fintech platform in the Indian market. It is not yet clear whether this would be an agnostic platform or a group specific platform. This will leverage the brand and network of Reliance as well as its strong retail and digital franchise. The various customer touchpoints will leverage the Fintech advantage as the group foresees more business coming from the digital platforms in future. It would effectively be a lateral and backward integration to add value to the entire Reliance digital and retail ecosystem.