Jio Financial slips 5% after listing at Rs 262 per share on exchanges

• Stock offers a bouquet of financial services to investors across payments, lending, asset management and insurance.
• Company has a balance sheet of Rs 1.1 trillion already and is the fifth largest financial services firm by capital.
• The shareholding of Jio Financial Services mimics the shareholding pattern of its parent RIL. Promoters (Ambani family) will hold 46% stake in the new company.

Shares of Jio Financial listed at Rs 262 per share on the exchanges on Monday but ended at a five percent lower circuit at Rs 248.9 per share. The listing kicks off the value unlocking process undertaken by Reliance Industries, which demerged its financial services arm earlier this year. Shares of Jio Financial, which was valued at $20 bn through a special trading session prior to its listing. This valuation makes Jio Fin the second most valued non-banking financial services firm in the country. The reason for the valuation of Jio Fin is primarily due to the 6.1% stake the company holds in Reliance Industries. The listing was expected to happen around Diwali but was advanced to 21 August.

Jio Financial’s balance sheet at the end of FY23 was Rs 1.1 trillion and core net worth (ex cost of investment in shares of RIL) is Rs 31,600 crore. According to Jefferies, Jio FS also has investments in preference shares of associates and JVs worth Rs 17,600 crore. On asset side, investments are at Rs1.1tn which include MTM gains and the majority of residual assets are liquid assets. Jio Financial will compete with other behemoths like Paytm, Bajaj Finance and other bank-led lending platforms in times to come as it will offer a variety of services.

The non-banking financial services firm will lend to both retail consumers as well as businesses and will also have a payments platform. Apart from the lending and payments businesses, it seeks to be present in insurance broking and asset management businesses. The management team will bank on team ramp-up & digital platforms that are powered by data and analytics. The exchange derived price of Rs262/share includes value of stake in RIL & valued the company at 2x on core price to book value.

To begin with, Jio Financial will build a loan book comprising loans that will finance consumer durables sold at its retail stores while the merchant lending will include sellers on its fashion, grocery and pharma platforms. In the small and medium enterprises segment, the company aims to give out working capital loans to these businesses. The company has already announced a partnership with Blackrock for its asset management business.

The shareholding of Jio Financial Services mimics the shareholding pattern of its parent RIL. Promoters (Ambani family) will hold 46% stake in the new company as is the case with RIL. The new financial behemoth’s chairman is KV Kamath, the former CEO/Chairman of ICICI Bank and on board of RIL) Hitesh Sethia (earlier with ICICI Bank) is CEO of Jio Fin, while Charanjit Attra is the COO (earlier CFO at SBI).

According to global investment bank Jefferies, “While teams are being built across segments, management is planning to intensely focus on digital platforms across verticals. Its asset-backed balance sheet, strong credit rating and promoter backing would also help get access to funds at cheaper rates, especially after the merger of HDFC Limited with HDFC Bank.