What does Jio Financial demerger from Reliance mean for shareholders, competitors? Avinash Gorakshakar explains

Shares of Reliance Industries Ltd (RIL) advanced in Thursday’s trade after the energy-to-telecom behemoth said that it has secured the approval of equity shareholders, secured creditors and non-secured creditors to demerge Reliance Strategic Investments (RSIL) from RIL. Market watchers believe that the decision is positive for the existing shareholders and it may create disruption in the NBFC segment from FY25 onwards.

The scrip traded 0.87 per cent higher at Rs 2,440.90 at around 2.45 pm (IST). On the other hand, the benchmark BSE Sensex was up 440 points, or 0.72 per cent, at 61,634.12.

In a regulatory filing RIL said votes were 99.9994 per cent in the favour of a resolution in the case of unsecured creditors and equity shareholders; and 100 per cent in the case of secured creditors.

RSIL will be renamed as Jio Financial Services which is expected to list on bourses by October 2023. While sharing his views on Reliance Industries and possible disruption in the financial services sector, Avinash Gorakshakar, Head-Research, Profitmart Securities said, “Once Jio Financial gets listed separately whole basket of products from the financial services space is going to be made available by the Reliance Group. Initially, it will be targeting Jio customers which are roughly about 40-45 crore in number. They have a ready customer basket and it is going to be huge competition for existing companies like Bajaj Finance and other financial intermediaries.”

He further said that this may help customers to get the best deals at the best prices. This company will create a very big disruption in the financial services space.

As part of the demerger scheme, Reliance Industries shareholders will get one share of Jio Financial for every share they own.

“The demerger will unlock value for shareholders. On a standalone basis, this business has a very strong growth momentum considering the fact that they have a very big base of captive customers in terms of Jio customers,” Gorakshakar said adding right from asset management, wealth management and broking, there are many areas where this company may enter going ahead.

He further said that RIL is known for offering the best quality at affordable prices. Possibly, they may use the same principle in the financial services business and create massive disruption in terms of pricing and delivery of financial services to final customers.

For stock-specific investors, he advised market participants to add Reliance Industries in the range of 2,300-2450 for a target of Rs 2,900-3,000 in the next 12-18 months. “Once the event happens the stock will see re-rating. Investors can also consider Jio Financial on listing provided they stay with the company for a long term,” Gorakshakar said in an interaction with Sakshi Batra of Business Today TV.

Also read: Cognizant 2023 guidance: Key takeaways for Infosys, TCS, Wipro, HCL Tech & TechM

Also read: HDFC Q4 results: Profit jumps 20% to Rs 4,425 crore; Rs 44 dividend announced