Reliance Industries shares: What Nomura says on Jio Financial Services listing, AGM

Nomura India in its latest note on Reliance Industries (RIL) said that the demerger of Jio Financial Services would help the financial services business of the oil-to-telecom major to attract different sets of investors, strategic partners and lenders having a specific interests in the financial services business. As a separate entity, Jio Financial Services would be able to have higher leverage in-line with industry standards, it said, adding that Jio Financial Services can drive value unlocking as it scales up, given higher multiples for peers in these industries.

The brokerage has reiterated its 'Buy' rating on RIL stock with a target of Rs 2,850.

"RIL is our top pick in the Indian energy sector. We note the recent decline in RIL’s share price has been underpinned by index-related sell-off, while the outlook across RIL’s businesses remains strong. The listing and value unlocking from RIL’s financial services business in the coming months will be a key event for the stock," the brokerage said.

The brokerage expects the company to lay down a strong roadmap for growth in the financials sector in the coming annual general meeting (AGM).

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While significant efforts are needed to scale the financials business, given RIL's robust execution, capacity to invest, industry leading retail infrastructure and leading market share across the retail and telecom industry, it appears likely that Reliance Industries will dominate the industry, Nomura said.

Nomura said RIL has progressed further in the process of demerging its financial services business by conveying a meeting of its secured and unsecured creditors and shareholders on May 2 and that it expects the demerger and listing of Jio Financial Services to conclude in the coming months.

It noted that the implementation of the proposed scheme is subject to approval from the National Company Law Tribunal, Reserve Bank of India, Insurance Regulatory and Development Authority of India and other regulatory authorities.

Applications for approvals have already been submitted to the RBI and IRDAI, it noted.

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