Jio Financial Services temporary Nifty inclusion: What RIL investors need to know

With Reliance Industries (RIL) announcing July 20 as the record date for demerger of the financial services business, the demerged entity Reliance Strategic Investments (to be renamed as Jio Financial Services or JFS) will be added to the Nifty and other indices the same day, as per NSE methodology.

Reliance Industries shareholders, who would be holding the oil-to-telecom major's shares as on July 20, would be eligible to receive shares of JFS in the 1:1 ratio.

The corporate action will influence share price of Reliance Industries on July 20, as the scrip trades ex-date. But RIL shareholders would see the spun off business getting included in Nifty and other indices at constant price.

This constant price would be derived from the difference between Reliance Industries (the demerged company) closing price on July 19 (T-1 day, wherein T is ex-date for demerger) and price derived during special pre-open session (SPOS) on July 20. For example, if Reliance Industries shares close at Rs 2,800 on July 19 (Wednesday) and settle at Rs 2,650 in the special pre-open session, the value for JFS would be Rs 150.  

Watch: Reliance-JFSL Demerger: Jio Financial Services share price at Rs 261.85; RIL shares jump 1.5% today; check how BSE, NSE indices will treat JFS, when it is likely to be listed, and more

On July 19, post market hours, a dummy symbol will be added to Nifty. The dummy symbol would represent identical properties of RIL symbol (i.e. number of shares, investible weight factor and capping factor etc.) as may be applicable.

On July 20, the Nifty will be represented by 51 securities with initial price of dummy symbol set to be zero. The special session for price discovery will take place between 9 am and 9:45 am.

During the SPOS, Nifty value will be calculated using the most recently available price of 49 stocks, previous day’s closing price of RIL (50th security) and zero price of dummy symbol. After the closure of SPOS, discovered price and indicative price of dummy would be calculated simultaneously.

The newly listed symbol would be a part of the index for a temporary period. As per NSE Indices methodology, the new symbol will be removed from the index after end of day (EOD) on third day of its listing.

"In case, during the first 2 days of these 3 days, if the spun off business/entity hits the price band on both days, then the exclusion date shall be deferred by another 3 days. After observing two consecutive days of the spun off business/ entity not hitting the price band, such spun off business/entity shall be removed after the third trading day of such observation," Nifty Indices – Methodology Document, July 2023 suggested.

"If on such 3rd day spun off business/ entity again hits the price band, exclusion of such stock shall not be deferred anymore," it added.

JFS will be listed within 2-3 months, analysts expect. 

Axis Securities recommended investors to buy Reliance Industries shares before the record date i.e. by July 19 as it believes it to be a more economical way to buy Jio Financial  Services that is likely to list at Rs 160 per share. Nuvama estimates a value of Rs 168 per share for JFS.

Axis Securities said it values Jio Financial Services at the treasury stock valuation of Rs 1,08,597 crore at 1 time RIL’s treasury stock valuation. The company’s total outstanding shares stand at 676.6 crore, implying each share’s valuation would  be Rs 160 per share, Axis Securities said.