News

Published: August 22, 2023
Updated: August 22, 2023

Jio Financial's Market Debut: Shares Slide 5% on Opening

In a closely-watched market debut, shares of Jio Financial Services, a spin-off from Reliance Industries owned by Mukesh Ambani, faced a 5% drop, hitting their lower circuit limit. The stock concluded its first session at Rs 248.9 on the NSE, well below the initial price of Rs 261.85. The BSE witnessed a similar trend with the stock ending at Rs 251.75 compared to the discovered price of Rs 265. The day saw around 78 million shares of Jio Financial being traded across both exchanges.

Passive Mutual Funds Shed Shares:

Analysts attributed the decline to passive mutual funds unloading shares ahead of Jio Financial's removal from the Nifty50 and Sensex indices. These funds collectively held approximately 145 million shares of the company, which they received through the demerger with Reliance Industries. Due to current trading restrictions, these funds only managed to partially sell their holdings on the debut day.

Valuation and Positioning:

At the end of the trading session, Jio Financial Services was valued at Rs 1.6 trillion, making it the 34th largest firm in India by market capitalization and the third-largest non-banking financial company (NBFC), trailing behind Bajaj Finance and Bajaj Finserv.

Exclusion Rules and Market Reaction:

In accordance with stock exchange rules, if Jio Financial's shares hit their trading limit for another day in the next two days, their removal from indices would be postponed for another three days. Otherwise, the stock would be delisted by August 23. The company's initial 10 days of trading post-listing are confined to the Trade-To-Trade (T2T) segment, allowing only delivery-based transactions within a 5% circuit limit.

Late-Mover Advantage:

During the listing ceremony at BSE, Chairman K V Kamath expressed the company's intention to capitalise on India's growth momentum, highlighting the advantage of being a latecomer in terms of technological advancements.

Diverse Financial Services:

Jio Financial is set to operate across four key areas: retail lending, asset management, insurance broking, and digital payments, positioning itself as a comprehensive financial sector player.

Mixed Views on Impact:

While concerns of disruption similar to that seen in the telecom sector have been raised due to the company's entry into the NBFC space, market experts hold mixed opinions. IIFL Securities predicts no major disruption, while Morgan Stanley suggests it's too early to draw conclusions on the sector's implications.

Prominent Players and Ventures:

Jio Financial's board includes veteran banker K V Kamath, with Isha Ambani and Anshuman Thakur as non-executive directors. The company has entered a 50:50 joint venture with BlackRock for asset management in India, backed by an initial investment of $150 million each from both partners.

Jio Financial's market debut faced a challenging start with a 5% drop in shares. Passive mutual funds selling off shares ahead of the company's exclusion from key indices contributed to the decline. However, the company's long-term positioning in the financial sector, its comprehensive range of services, and strategic partnerships present opportunities for growth and impact.