Jio Financial hits 5% lower circuit for second straight day post listing

Till 11:39 am; a combined 6.03 million shares changed hands, with pending sell orders for 106 million shares on the NSE and BSE

Shares of Jio Financial Services locked in 5 per cent lower circuit at Rs 239.2 per share on the BSE in Tuesday's intra-day trade.

On the National Stock Exchange (NSE), meanwhile, the stock of Reliance Group's non banking finance company locked at Rs 236.45, with only buyers seen on the counter.

A combined 6.03 million shares changed hands, with pending sell orders of 106 million shares on the NSE and BSE.

Jio Financial Services locked in 5 per cent lower circuit for the second straight day after its market debut on Monday, August 21. The stock corrected 14 per cent from its high of Rs 278.2 touched on BSE in Monday's intra-day trade. On the NSE, it hit a high of Rs 262.05 on Monday.

The equity shares of Jio Financial Services (formerly known as Reliance Strategic Investments Limited) was listed and admitted to list of T Group of Securities. The scrip will be in Trade-for-Trade (T2T) segment for 10 trading days effective August 21. T Group stocks are not allowed for intra-day trading. The T2T stocks can only be delivery based i.e. the buyer has to take the delivery of these shares.

According to market players, passive schemes tracking Nifty50 and Sensex unloaded shares of Jio Financial ahead of the company’s exclusion from the two indices.

These funds hold around 145 million shares of Jio Financial, allotted to them as part of the demerger exercise with Reliance Industries. Given the scenario that intra-day trade is not allowed in the stock, passive MFs managed to sell only part of their holdings on day one.

Jio Financial Services aims to provide a range of financial services like lending, payments services, payment banking, insurance broking, asset management. The target customers are unserved/underserved individuals and small-sized businesses in urban, semi-urban, rural India. The company holds a 6.1 per cent stake in Reliance Industries (RIL) through a subsidiary.

Further, the company also offers payments services, payments banking, insurance broking, etc, which together with the other products will eventually drive customer relationships and cross-sell, as per the company.

Jio Financial Services entered a 50:50 joint venture with Black Rock for asset management business in India. Both partners plan to make an initial investment of $150 million each.

According to analysts at Morgan Stanley, the consolidated entity is starting with a capital base of Rs 1,141 billion as of Mar-23 (Rs 193.5 billion ex-book value of RIL stake). If it were to allocate this capital to the lending business, this would likely result in it being among the largest NBFCs by net worth.

“While this implies significant capacity to lend, we will need to see the pace and mode of execution (organic/inorganic). Hence, the market will closely watch every move Jio Financial Services makes. While the common view has been that lenders with a higher share of Consumer and MSME business are more at risk, we note that these segments are incremental drivers of loan growth and profitability for the financial sector at large. Hence, strength of the franchise will matter more than magnitude of exposure,” the brokerage firm added.

Those at Jefferies believe that the management is planning to intensely focus on digital platforms across verticals as teams are being built across segments.

"The company's asset-backed balance sheet, strong credit rating and promoter backing would also help get access to funds at cheaper rates, especially after merger of HDFC with HDFC Bank," the brokerage firm added.