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Jio Financial makes tepid market debut; shares hit 5% lower circuit

Chairman Kamath says to have late-mover advantage

Jio Financial Services Limited

Jio Financial Services Limited listing

Abhishek KumarAathira Varier Mumbai
Shares of Jio Financial Services, carved out of Mukesh Ambani’s Reliance Industries, hit their 5 per cent lower circuit limit after a widely watched trading debut on Monday.  
 
The stock ended the session at Rs 248.9 on the NSE, as against the discovered price of Rs 261.85, amid selling by passive mutual funds. It settled at Rs 251.75 on the BSE, as against the discovered price of Rs 265. About 78 million shares of Jio Financial were traded on the two exchanges.
 
According to market players, passive schemes tracking the Nifty50 and the Sensex began unloading 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 that intra-day trade is not allowed in the stock currently, passive MFs managed to sell only part of their holdings on day one.

At the end of the trading session, Jio Financial’s valuation stood at Rs 1.6 trillion, making it the 34th largest firm in India by market capitalisation, and the third-largest non-banking financial company (NBFC) -- only behind Bajaj Finance and Bajaj Finserv.

According to rules framed by the stock exchanges, if shares of Jio Financial hit their trading limit for one more day over the next two days, their exclusion will be deferred by another three days. If not, the stock will be removed on August 23.

For the first 10 days post-listing, the company is set to trade in the Trade-To-Trade (T2T) segment. Shares under this section can only be bought for delivery and cannot be traded on an intraday basis with the upper circuit and lower circuit limits set at 5 per cent.

During the listing ceremony held at the BSE on Monday, K V Kamath, chairman of Jio Financial Services, said the company’s intention was to capitalise on India’s growth momentum.

“We will go with the India story. Go with the story of being a digital- first institution. In this context, there are some advantages to being a little late to the party. You have the advantage of riding on the technological developments, which are already visible and optimising them to the full extent,” K V Kamath said.

Jio Financial will be a full-service financial sector player, offering a range of products from retail lending to insurance, and digital payments business.

“Jio Financial listed on August 21 at almost the derived price based on the trades done on July 20, 2023. It has since fallen due to selling pressure by index funds who have a three-day window to exit from the stock, which is not going to remain part of the Indices. Although Street participants are excited about the potential of the stock, they could wait till this selling pressure ebbs,” said Deepak Jasani, head of retail research at HDFC Securities.

According to the information memorandum, Jio Financial will be operating through four verticals --- retail lending, asset management, insurance broking, and digital payments.

The entry of the company into the NBFC space has stoked concerns about a disruption similar to the one in the telecom business.  However, market experts maintain a mixed view, with IIFL Securities not expecting any disruption but a slight negative impact on the profitability of other companies. Analysts at Morgan Stanley, however, said it was too early to comment on the same.

“JFS’s entry may not be disruptive for other players’ growth prospects, given the relative under-penetration. But, it can potentially dilutive high profitability of these segments, if JFS competes on pricing," an IIFL Securities report said.

“Jio Financial Services is coming with significant capital, however, we will need to watch the pace and mode of execution (organic/ inorganic). Hence, we believe it is too early to make any concrete judgement on implications for the NBFC sector,” the Morgan Stanley report said.

According to the shareholding pattern of Jio Financial Services, 46 per cent equity is held by the promoters of Reliance Industries.

The board of the company includes veteran banker K V Kamath, while Hitesh Sethia is the chief executive officer (CEO) and Charanjit Attra is holding the position of chief operating officer (COO). Isha Ambani and Anshuman Thakur are the non-executive directors of the company.

IIFL Securities estimated Jio Financial’s lendable net worth at $2.7 billion, with consumer durables, unsecured personal loans and small-ticket merchant loans being the initial targets of the company. The business is anticipated to gradually scale up (save for any acquisitions) as it builds out physical and collections infra.

The company has already entered into a 50:50 joint venture with BlackRock for the asset management business in India, with an initial investment of $150 million each from both the partners.

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First Published: Aug 21 2023 | 8:51 PM IST

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