Reliance Demerger Unlocks Value: Jio Financial Shares Valued at Rs 261.85 Apiece
The separation of its financial services arm may have a beneficial effect on the shares of Reliance Industries (RIL). Brokerage companies think the demerger has the potential to release a lot of value for the business and its owners, which might raise the share price by 3-5%.
Reliance Industries’ shares increased by more than 1% on Tuesday, July 18th, during morning trading on the Bombay Stock Exchange (BSE), reaching a 52-week high of $2,825.95.
The National Company Law Tribunal had earlier on July 8 authorised the demerger of RIL’s unit, Jio Financial Services, according to a BSE filing. The firm released this information on the historic day of July 20, 2023.
RIL announced that Jio Financial Services Limited would be formed through the merger of its financial services businesses.
Reliance Industrial Investments and Holdings Limited (RIIHL), a subsidiary of Reliance Industries, would be transferred to Jio Financial Services Limited as part of the process.
According to a number of analysts, the demerger may boost the company’s worth and provide shareholders a chance to wager on the stock. For instance, brokers at Nuwama Wealth Management advise investors to purchase RIL shares at a target price of 3,205.
“We think that the demerger of RIL’s financial services is an unlocking event, much as the separation of RIL’s four businesses in 2005. The stockholders’ wealth had grown by 38% following that demerger. This time around, too, the market may treat RIL favourably, and shareholders’ wealth may rise by as much as 3%, according to Nuwama.
Prior to the record date of July 20, 2023, brokerage company Axis Securities also advised purchasing RIL shares because it thought that buying Jio Financial Services would prove to be an affordable option, perhaps going public at a price of 160 rupees per share (based on RIL’s treasury stock value).
Following the demerger, RIL’s ownership structure is anticipated to resemble that of the company today. Analysts are also seeking further information on the company’s business strategy. Esha Ambani has been appointed to the board of Jio Financial Services as a non-executive director, while Hitesh Sethia, a former ICICI executive, will take over as the company’s new CEO and MD.
Jio Financial Services wants to expand into industries including insurance, digital payments, and asset management in addition to its primary concentration on the NBFC (non-banking financial firm) and lending sectors.