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Introduction : Jio financial services’ performance
The market landscape saw a notable shift as Shares of Jio Financial Services Ltd. experienced a downturn, initiating a lower circuit in the wake of its subdued premiere on the Indian stock exchanges this past Monday. The debut unfolded with the company’s shares entering the arena at Rs 262 apiece on the National Stock Exchange, edging above the derived price of Rs 261.85. Over on the Bombay Stock Exchange (BSE), the stock’s entrance was marked at Rs 265, a step above the derived price of Rs 251. This initial movement set the stage for an intriguing development in the financial markets.
Initial trading activity and scheme approval
During the opening trading hour, the company’s shares triggered a lower circuit of 5%, with prices settling at Rs 248.90 on the NSE and Rs 251.75 on the BSE. In the previous year, the company’s board had granted approval for a scheme that involved Reliance Industries Ltd., Reliance Strategic Investments Ltd., and their respective stakeholders. This strategic move aimed to demerge the financial services division into Reliance Strategic Investments.
Index removal criteria
Jio Financial Services (JFS) will be excluded from the indices only after the conclusion of the third day. However, if the share price triggers the circuit on both the first two days, the exclusion process will be postponed by an additional three days. Should JFS avoid hitting the price band for two consecutive days, it will be removed from the indices after the third trading day, irrespective of whether the price band is breached on the final day.
Market valuation and ownership
The derived price of Rs 262 per share translates to a market capitalization of approximately Rs 1.6 lakh crore. Additionally, the core-book valuation stands at 1.9 times the price-to-book ratio. Notably, a 6.1% stake in Reliance Industries Ltd. (RIL) holds a value of Rs 1 lakh crore, equivalent to 63% of the overall market capitalization. The company’s promoters maintain a 46% stake, as highlighted in a note by Jefferies.
Core business focus
Jio Financial Services’ management has identified several key areas of business focus, detailed in the information memorandum:
- Retail Lending: Initially, consumer lending will center around financing for consumer durables sold through retail stores, with plans to expand to more secured loans later.
- Merchant Lending: This vertical targets various merchant categories, including grocery, digital, fashion, and pharma formats.
- Payments Bank Operations: The company plans to enhance and expand its payments bank operations.
- Payments Solutions and Insurance Broking: Jio Financial Services aims to build robust payments platforms for merchants, while also venturing into insurance broking.
SME segment and future venture
In the SME segment, the focus will be on providing working capital loans to small and medium-sized enterprises. The company intends to strengthen its payments platforms catering to merchants, further develop the Jio Payments Bank, and establish insurance broking services. Furthermore, a joint venture with BlackRock has been established to launch an Asset Management Company (AMC) business, among other potential ventures.
Leadership and shareholding
The shareholding pattern of Jio Financial Services mirrors that of its former parent company, RIL, with promoters holding a significant 46% stake. The company’s chairperson is KV Kamath, a former CEO of ICICI Bank Ltd., and a board member of RIL. The CEO is Hitesh Sethia, formerly associated with ICICI Bank. The leadership team also includes Charanjit Attra as the Chief Operating Officer, Manish Singh as the Chief Human Resources Officer, and Abhishek Pathak as the Chief Financial Officer.
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