Reliance Industries' Jio Financial Valued At $20 Billion In Demerger, Exceeding Forecasts

Reliance Industries Limited, the Indian conglomerate led by billionaire Mukesh Ambani, has witnessed immense success with its spin-off venture, Jio Financial, which has been valued at a staggering $20 billion after the demerger, when its stock price was set at 261.85 rupees ($3.19), was significantly more than anticipated

The oil-to-retail giant Reliance announced the demerger in October of last year as a means of growing in the lucrative financial services industry, especially as it already holds a non-bank financial firm licence.

Jio Financial would rank among the top 40 Indian corporations by market capitalization at a $20 billion valuation, behind Reliance ($233 billion), which leads the list.

In a first, the main stock exchanges in India organised a unique hour-long "pre-open call auction" trading session on Thursday for Reliance to decide the share price of JFS.

The price was set at 261.85 rupees, which is the difference between Reliance's closing price on Wednesday of 2,841.85 rupees and its price at the conclusion of the special session of 2,580 rupees.

The stock price for JFS is higher than analysts' predictions of 160 to 190 rupees. For every Reliance share a shareholder has, they will receive one JFS share.

"This shows people are quite confident about the future performance of JFS with exposure to Jio's mobile customer base. It also holds nearly 1 trillion rupees of Reliance's treasury shares. These factors have given lot of confidence to investors," said G Chokkalingam, founder and head of research at Equinomics.

"Reliance Industries will also rise significantly from here as JFS unlocking is just the beginning and there will be much more for the shareholders from growth opportunities for retail and telecom," he said.

JFS will be a part of important Indian indices, such as the benchmark Nifty 50 (.NSEI), but it won't trade until it is listed; Reliance will probably decide when this will happen at its upcoming annual general meeting.

According to analysts, JFS's access to massive volumes of data from Reliance's retail and telecom operations will also help it launch lending. According to Macquarie Research, JFS would probably have a AAA rating and be able to borrow money at favourable rates.

Reliance Strategic Investments, the division that will become JFS, said late on Wednesday that its April-June earnings were 1.45 billion rupees ($17.7 million) after taxes on revenue of 2.15 billion rupees.

From July 8, when it set the record date for the demerger, to Wednesday, Reliance shares had increased by roughly 8%.

After the special session, the stock was trading roughly 1.1% higher at 11.50 a.m. IST. It has increased by 11.6% thus far this year, beating the Nifty 50's growth of 9.5%.