This is expected to create a big player in segments including the NBFC (non-banking financial company) space with net worth of Rs 25,851 crore as of March 2022.
According to the plan, RIL shareholders will get a share in the demerged entity for each one held in the company. After demerger, the shares of Reliance Strategic Investments will be named Jio Financial Services, and will be listed on the National Stock Exchange and the BSE, the company said in a statement.
On rationale and benefits of the scheme, RIL said further growth and expansion in financial services would require a differentiated strategy aligned to the industry-specific risks, market dynamics, and growth trajectory.
The nature of financial services is distinct from other businesses and they are capable of attracting a different set of investors, strategic partners, lenders and other stakeholders, it said.
A financial services company can have higher leverage for growth and would unlock the value for shareholders of the demerged company. With emphasis on financial inclusion, the government, as well as regulators, has been developing policies for services including banking, NBFCs, insurance, mutual funds, etc.
In past four months, RIL had underperformed the market by falling 18 per cent, against 8 per cent decline in the S&P BSE Sensex. The stock almost tested its 52-week low of Rs 2,180 on March 20, 2023. It had hit a 52-week high of Rs 2,855 on April 29, 2022.
Meanwhile, in current calendar year 2023 (CY23), analyst at JP Morgan continue to see RIL as a relative outperformer in what could be a sluggish earnings environment overall, but see multiple potential catalysts over CY24-25 to help drive absolute outperformance.
“We see continued strength in refining business, a likely rebound in Petrochem spreads from decadal low levels from China re-opening, and volume growth in E&P – driving earnings growth. RIL continues to offer multiple growth optionality across businesses (petrochem, E&P, telecom, retail, financial services, new energy) and ongoing investments should drive the next leg of growth,” the brokerage firm said in a report.
RIL’s ongoing capex/investments should allow it to scale up its (already Industry-leading) petrochem, telecom and retail segments. New energy is likely a multi-year opportunity, but we do not see it as material to the investment case for next 12- 18 mths. We expect this year’s AGM to focus on Jio Financial Services (JFS), the brokerage firm said.
Bias: Marginally Positive
Support: Rs 2,285; Rs 2,250
On the downside, the 20-DMA at Rs 2,285 is likely to act as an immediate hurdle, below which the next significant support is seen at Rs 2,250 level.