Jio Financial lists at Rs 265, becomes 33rd most-valued co; should you buy?

At 10:21 AM, JFS was locked at the 5 per cent lower circuit when compared with the special discovery price of Rs 261.85. The stock was locked at Rs 251.75 on the BSE and Rs 248.90 on the NSE

Shares of Jio Financial Services (JFS), the demerged unit of Reliance Industries (RIL), listed at Rs 262 on the National Stock Exchange (NSE) and at Rs 265 on the BSE on Monday, August 21. Post listing, the stock turned volatile as it hit a high of Rs 278.20 and subsequently a low of Rs 251.75 on the BSE; whereas on the NSE, it hit a high of Rs 262.05 and a low of Rs 248.90.

At 10:21 AM, JFS was locked at the 5 per cent lower circuit when compared with the price of Rs 261.85, which was discoverd during the special session on July 20. The stock was locked at Rs 251.75 on the BSE and Rs 248.90 on the NSE, the exchange data show.

A combined 68.43 million equity shares of JFS have changed hands on the NSE and BSE thus far in trades. There were combined pending sell orders for nearly 10 million shares on both the exchanges.

That said, with Rs 1.6-trillion market capitalisation, JFS stood at 33rd position in the overall market cap ranking, the BSE data shows. JFS stood behind state-owned power transmission company, Power Grid Corporation of India, which has a market cap of Rs 1.71 trillion, data shows.

Going forward, analysts remain divided on Jio Financial Services' stock. For G Chokkalingam, founder and head of research at Equinomics Research and Advisory, Jio Financial Services is still an attractive 'buy', and investors, he suggested, could continue to add to accumulate the stock till Rs 300 apiece.

Another analyst at a domestic brokerage, who didn't wish to be named, however, said that there are certain ambiguities around JFS, which may keep the stock volatile in the near-term.

"There are certain concerns around JFS. Firstly, it has been admitted under the 'T' group of securities. Secondly, a lot of institutional investors have received JFS shares due to their holding in Reliance Industries. It remains to be seen if they want to continue holding the stock. Right now, the share price is a game of demand and supply rather than business valuation," he said.

The equity shares of JFS (Formerly known as Reliance Strategic Investments Limited) listed and admitted to dealings on the Exchange in the list of T Group of Securities. The scrip will be in Trade-for-Trade (T2T) segment for 10 trading days. T Group stocks are not allowed for intraday trading. The T2T stocks can only be delivery based i.e. the buyer has to take the delivery of these shares.

JFS - which is currently a part of the benchmark Nifty50 and Sensex - will move out from both the indices three days after its listing. According to Nuvama Alternative & Quantitative Research, the exclusion will happen on August 24.

After the exclusion, passive mutual fund schemes tracking Nifty50 and Sensex, will have to offload their holdings in the stock. Nifty50 funds now hold around 90 million shares, while Sensex funds 55 million, as per Nuvama. Their holding is worth around Rs 3,800 crore at the present price, Business Standard reported. CLICK HERE FOR FULL REPORT

AK Prabhakar, head of research at IDBI Capital, too, believes investors should book profit in the counter.

"Against expectations of price discovery of Rs 140-160 per share, the special trading session already value the stock at Rs 262. At current market price, the market capitalisation of JFS stands closer to Rs 1.6 trillion. Investors can book out right now, and buy at lower levels two-three years down the line," he added. 

RIL had offered one share of JFS for every share owned by the firm’s investors. The new entity is expected to unlock value for shareholders and give them an opportunity to be a part of a new growth platform. JFS, along with its subsidiaries, will leverage the technological capabilities of Reliance and digitally deliver financial services, democratising access to financial services offerings for Indian citizens. JFS aims to provide simple, affordable and innovative digital first solutions, RIL said in its FY23 annual report.

JFS is positioned uniquely to capture the growth opportunities in financial services sector and play a crucial role in transforming the landscape of digital finance in India, the company said.

Over the long-term, however, analysts expect the company to benefit from Reliance’s wider presence in digital and retail businesses, potentially positioning it among India’s biggest non-banking finance companies and helping Ambani create an empire similar to China’s Alibaba Group Holding Ltd. and Tencent Holdings Ltd.

JFS had earlier said that it would have a presence across four businesses: Lending (Consumer Loans and Merchant loans), Insurance (both Life and Nonlife), AMC and Wealth Management, and Payments Bank.

"JFS' businesses will likely leverage strengths of the group – technology-first approach underpinned by group tech capabilities, JIO's reach, relationships with vendors and individual customers. Among others, it will focus on tapping borrowers who access high-interest informal channel," said a report by Kotak Institutional Equities.

To begin with, the brokerage believes the focus would be on consumer durable loans, likely through the network of Reliance Digital. The consumer durable finance market is largely dominated by Bajaj Finance and is a customer acquisition engine for most players.

"The overall market is not very large; we estimate consumer finance disbursements at Rs 1.35 trillion in FY23; outstanding book may be much lower as most loans have a short tenure. Even for Bajaj Finance, this business is more than 10 per cent of the loan book," it said.

JFS has reported capital of Rs 1.22 trillion (Rs193/share) as on June 2023; Net Asset Value (NAV), RIL's CMP is Rs198. This includes the 6.1 per cent stake in RIL and cash/liquid investments of Rs 20,000 crore as highlighted in RIL's last earnings call. "Sensitivity of its NAV to holding-company discount on investment in RIL and multiple to ex-investment net worth (Rs 20,000 crore)," it added.