Mumbai: Reliance Industries Ltd.’s financial services unit was valued at around $20 billion after a special session conducted by the exchanges to assess its business value.
Jio Financial Services Ltd was priced at Rs 261.85 ($3.19), based on the difference between Reliance’s stock price on Wednesday and Thursday’s close of trade at 10:00 am after an hour-long special pre-market session in Mumbai. India’s most valuable company Reliance will now trade on exchanges without its financial services arm.
JPMorgan Chase & Co and Axis Securities expected Jio Financial to be priced between Rs 160 and Rs 189 per share. Avendus Spark estimated the company’s value at up to $14 billion.
On Wednesday, Reliance Industries said after the spinoff, each share of Jio Financial would be worth 4.7% of Reliance’s closing price on that day. With this, Jio’s share price will be Rs 133 per share.
spinoff will bring Mukesh AmbaniOne of the richest men in Asia, a step closer to building a multimillion-dollar empire on par with Alibaba Group Holding Ltd. and Tencent Holdings Ltd. Ambani has big ambitions to bring together various areas of business including telecom, financial and e-commerce services within a single large conglomerate.
Reliance shares rose 1.7% to Rs 2,632 on Thursday.
new method
This is the first time that Indian exchanges have used a new method of price discovery for listed companies undergoing mergers and acquisitions as they seek to reduce price volatility in benchmark indices. Trading in Jio Financial will resume at a later date, but officials are keeping an eye on any volatility in the market as Reliance Industries has a weight of about 11% in the Nifty 50 gauge.
Abhilash Pagaria, Analyst, Nuwama Wealth Management Ltd. said, “The trend of passive funds has increased in India in the last 3 to 4 years, so the exchanges had to come up with rules to avoid any disruption in the index components.” This would be a better way to deal with the demerger.
Pagaria said it may take up to a month for Jio Financial’s shares to be listed as the entity will be demerged from one of India’s largest conglomerates.
RIL offered one share of Jio Financial for every share owned by RIL investors. RIL’s stock closed at an all-time high on Wednesday as investors made last-minute attempts to qualify for Jio’s shares.
Ambani surprised investors last year by announcing the demerger of Reliance Strategic Investments and Holdings Ltd and its subsequent listing as Jio Financial to unlock the value of his oil-to-telecom conglomerate.
While analysts have indicated that the financial entity will be valued at lump sum price-to-book of trailing 12 months earnings, they expect the company to receive a premium valuation as Reliance details a strategic roadmap going forward.
Read more about Reliance
Deven Choksey, Managing Director, KR Choksey Shares & Securities Pvt Ltd said, “Even though this entity has very low revenue at the moment, there is huge growth potential, they can expand rapidly.” He expects Jio Financial’s assets under management to grow. $122 billion and revenue of $12.2 billion is projected for the company over the next five years.
Jio Financial Services Ltd was priced at Rs 261.85 ($3.19), based on the difference between Reliance’s stock price on Wednesday and Thursday’s close of trade at 10:00 am after an hour-long special pre-market session in Mumbai. India’s most valuable company Reliance will now trade on exchanges without its financial services arm.
JPMorgan Chase & Co and Axis Securities expected Jio Financial to be priced between Rs 160 and Rs 189 per share. Avendus Spark estimated the company’s value at up to $14 billion.
On Wednesday, Reliance Industries said after the spinoff, each share of Jio Financial would be worth 4.7% of Reliance’s closing price on that day. With this, Jio’s share price will be Rs 133 per share.
spinoff will bring Mukesh AmbaniOne of the richest men in Asia, a step closer to building a multimillion-dollar empire on par with Alibaba Group Holding Ltd. and Tencent Holdings Ltd. Ambani has big ambitions to bring together various areas of business including telecom, financial and e-commerce services within a single large conglomerate.
Reliance shares rose 1.7% to Rs 2,632 on Thursday.
new method
This is the first time that Indian exchanges have used a new method of price discovery for listed companies undergoing mergers and acquisitions as they seek to reduce price volatility in benchmark indices. Trading in Jio Financial will resume at a later date, but officials are keeping an eye on any volatility in the market as Reliance Industries has a weight of about 11% in the Nifty 50 gauge.
Abhilash Pagaria, Analyst, Nuwama Wealth Management Ltd. said, “The trend of passive funds has increased in India in the last 3 to 4 years, so the exchanges had to come up with rules to avoid any disruption in the index components.” This would be a better way to deal with the demerger.
Pagaria said it may take up to a month for Jio Financial’s shares to be listed as the entity will be demerged from one of India’s largest conglomerates.
RIL offered one share of Jio Financial for every share owned by RIL investors. RIL’s stock closed at an all-time high on Wednesday as investors made last-minute attempts to qualify for Jio’s shares.
Ambani surprised investors last year by announcing the demerger of Reliance Strategic Investments and Holdings Ltd and its subsequent listing as Jio Financial to unlock the value of his oil-to-telecom conglomerate.
While analysts have indicated that the financial entity will be valued at lump sum price-to-book of trailing 12 months earnings, they expect the company to receive a premium valuation as Reliance details a strategic roadmap going forward.
Read more about Reliance
Deven Choksey, Managing Director, KR Choksey Shares & Securities Pvt Ltd said, “Even though this entity has very low revenue at the moment, there is huge growth potential, they can expand rapidly.” He expects Jio Financial’s assets under management to grow. $122 billion and revenue of $12.2 billion is projected for the company over the next five years.