Reliance shares jump 3% on plan to demerge finserv biz

Shares of Reliance Industries rose over 3% in early trade on Friday after the oil-to-telecom conglomerate initiated the process for demerger of its financial services business. The Mukesh Ambani-led company will hold a meeting of its creditors and shareholders on May 2, 2023, to consider and approve the proposed scheme of arrangement between Reliance Industries and Reliance Strategic Investments (RSIL). As part of the scheme, the financial services business will be demerged into RSIL.

Following the completion of the demerger, the name of the Reliance Strategic Investments will be changed to Jio Financial Services Limited and the new entity will be listed on the domestic bourses.

Boosted by the demerger plan, RIL shares opened 0.9% higher at ₹2,256 against the previous closing price of ₹2,235.25 on the BSE. In the first two hours of trade so far, the index heavyweight climbed as much as 3.5% to ₹2,314.05, while the market capitalisation rose to ₹15.62 lakh crore. At the current price level, RIL shares trade 6% higher than its 52-week low of ₹2,180 touched on March 20, 2023, while it is down 19% against its 52-week high of ₹2,855 hit on April 19, 2022.

On March 27, the Mumbai bench of the National Company Law Tribunal (NCLT) had asked RIL to hold a meeting of the secured creditors, unsecured creditors, and equity shareholders of the company to seek their approvals for the spin-off of the financial services business. The voting will commence on April 27 and end on May 1, the country’s most valued firm said in a regulatory filing on Thursday.

“We wish to inform you that, pursuant to the directions of the National Company Law Tribunal, Mumbai Bench vide its order dated March 27, 2023, a meeting of the Unsecured Creditors of Reliance Industries will be held on May 02, 2023 at 11:45 a.m. (IST) through video conferencing / other audio visual means to consider and approve the proposed Scheme of Arrangement between Reliance Industries and its shareholders and creditors & Reliance Strategic Investments and its shareholders and creditors,” RIL said in a BSE filing.

In November 2022, the board of RIL had given green signal to the demerger plan. RSIL is currently a wholly-owned subsidiary of RIL and is a RBI-registered non-deposit taking non-banking financial company.

As part of the demerger plan, shareholders of RIL will receive one equity share of JFSL of face value ₹10 for one fully paid-up equity share of ₹10 held in RIL. The board has approved the entitlement ratio based on the recommendations of the independent valuer and merchant bankers.

KV Kamath, former MD and CEO of ICICI Bank, was named non-executive chairman of JFS. As of March 31, 2022, the turnover of the financial services business was ₹1,387 crore.

JFS plans to acquire liquid assets to provide adequate regulatory capital for lending to consumers and merchants. Adding to it, it will incubate other financial services verticals such as insurance, payments, digital broking, asset management for at least the next three years of business operations.

Besides, JFS plans to launch consumer and merchant lending businesses based on proprietary data analytics to complement and supplement the traditional credit bureau-based underwriting.