Jio Financial Services (JFS), the entity demerged from Reliance Industries, made a tepid debut on the stock market on Monday. The shares listed on the BSE at Rs 265 a piece, and Rs 262 on the NSE, close to the discovered price of Rs 261.85, but later traded in the 5 per cent lower circuit limit (Rs 248.90 on the NSE and Rs 251.75 on the BSE).
Jio Financial Services was demerged from Reliance Industries on July 20, 2023, and in a special pre-opening session, the stock price was discovered at Rs 261.85. This was based on Reliance's closing price at the end of the pre-opening session and the closing price the previous day.
Jio Financial Services has big plans in the non-banking financial services space. Just last month, it announced an equal share joint venture with US-based investment manager BlackRock to enter the asset management industry, marking Reliance's first steps in the financial services space.
"The growth opportunities presented by financial services are remarkable and provide strong directional support to the economy. As various financial services are governed by different regulatory frameworks, we believe, an independent financial services entity will allow us to access the opportunities available in the Indian market," Mukesh Ambani, chairman and MD of Reliance Industries said in his letter to shareholders.
Jio Financial Services along with its subsidiaries will leverage the technological capabilities of Reliance and digitally deliver financial services, democratising access to financial services offerings for Indian citizens, he further said.
"JFS's information memorandum lays out four key businesses that the company intends to target: retail lending, asset management, insurance broking and digital payments. Apart from these, our channel checks indicate that the company also has serious plans of entering the insurance business," said Viral Shah, research analyst at IIFL Securities.
The broking firm estimates JFS's lendable net worth to be $2.7 billion and expects it to initially target consumer durables, unsecured personal loans and small ticket merchant loans. Over the medium term, the company is expected to add larger ticket size and secure, consumer, merchant and micro, small and medium enterprise loans.
The market size of these segments is $200 billion out of $870 billion in total retail and SME lending, according to IIFL estimates.
"JFS's entry in these segments may not be disruptive on growth for other lenders given the relative under-penetration of retail lending in India. But, it can dilute the high profitability of these segments if it competes on pricing," said Shah.
The Mukesh Ambani-led company had set July 20 as the date to determine eligible shareholders for the allotment of shares of the demerged entity. One share of JFS was allocated to shareholders for every one share of Reliance Industries.