Jio Financial Services Disappoints On Debut, Ends At Lower Circuit

Mukesh Ambani's fintech company, Jio Financial Services Ltd., closed at 5% lower circuit at Rs 248.50 apiece after a muted listing on the Indian exchanges on Monday, a rarity for a company belonging to the group.

The JFS listing ceremony on the BSE also didn't see any of the promoter family member participation, including Isha Ambani, who is the director on the board. Only the key managerial personnel were present to ring the bell, including Non-Executive Chairman KV Kamath.

The last time a Mukesh Ambani company listed was a decade ago, when Reliance Petroleum Ltd. came with an IPO in 2013. RPL was subsequently merged with Reliance Industries Ltd.

The share, which was valued at close to Rs 1.6 lakh crore, saw flat discovery price of Rs 262 apiece and opened to selling pressure from investors, who waited for over 20 days for the stock to list.

The stock hit the lower circuit of 5% soon after listing and remained at the lower circuit, and according to the National Stock Exchange trade order book, it remained at the lower circuit with no buyers, and investors seeking to sell over 3.6 crore shares on the NSE.

The shares were listed almost unchanged at Rs 262 apiece on the National Stock Exchange over the derived price of Rs 261.85. On the BSE, the stock listed at Rs 265 over the derived price of Rs 251. This is against the expectation of listing premium widely expected by the street.

Shares of the company hit lower circuit of 5% and were trading at Rs 248.90 on the NSE and Rs 251.75 on the BSE during the first hour of trading.

JFS demerged from RIL, which is part of the many benchmark indices. The listing will see many of the passive funds or index funds exit the stock.

Last year, the board approved a scheme of arrangement among Reliance Industries Ltd., Reliance Strategic Investments Ltd. and their respective shareholders and creditors to demerge its financial services undertaking into Reliance Strategic Investments. The company was subsequently renamed as Jio Financial Services Ltd. It is yet to disclose business plans for the street to understand its business model. JFS currently has over 80% value attributed to 6.1% stake it holds in RIL and investments in other associates.

The special pre-open session for the demerger of RIL resulted in Jio Financial Services being ascribed a value of Rs 261.85 per share. 

JFS will only be removed from the indices after the end of the third day. In case the share price hits the circuit on both of the first two days, exclusion will be deferred by another three days. 

After two consecutive days of JFS not hitting the price band, it will be removed from the indices after the third trading day, even if it hits the price band on the last day.

Jefferies On Jio Financial Services

Derived price of Rs 262 per share implies market cap of Rs 1.6 lakh crore and core book valuation at 1.9 times price-to-book. Value of a 6.1% stake in RIL is Rs 1 lakh crore, 63% of the market cap. Promoters hold 46% stake, according to a Jefferies note.

Key Areas Of Business Focus

• In the information memorandum, Jio Financial Services' management has identified that core areas of businesses will include retail lending, merchant lending, payments bank operations, payments solutions and insurance broking.

• Consumer lending will include financing for consumer durables sold through retail stores to begin with and will add more secured loans later. Merchant lending vertical will focus on merchants in grocery, digital, fashion and pharma formats.

• In the SME segment, it will focus on working capital loans.

• It will build payments platforms focused on merchants, ramp up Jio Payments Bank and build insurance broking. It has also set up a JV with BlackRock to launch the AMC business and many other businesses.

Shareholding, Management Team And Board Of Directors

• The shareholding of Jio Financial Services replicates that of its erstwhile parent, RIL, with promoters holding 46% stake.

• KV Kamath is the chairperson (erstwhile chief executive officer of ICICI Bank Ltd. and on the board of RIL).

• Hitesh Sethia, who was earlier with ICICI Bank, is the CEO and many chief experience officers have been appointed, including Charanjit Attra as chief operating officer, Manish Singh as chief human resources officer and Abhishek Pathak as chief financial officer.