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

Jio Financial Services

Jio Financial Services – Following the announcement by Reliance Industries (RIL) of July 20 as the record date for the demerger of the financial services division, the demerged entity Reliance Strategic Investments (to be renamed Jio Financial Services or JFS) will be added to the Nifty and other indices on the same day, according to NSE methodology. 

Reliance Industries stockholders who held the oil-to-telecom major’s shares on July 20 would be eligible for JFS shares in a 1:1 ratio. 

The corporate action will have an impact on Reliance Industries’ share price on July 20, as the stock trades ex-date. However, RIL shareholders will see the spun-off business included in the Nifty and other indices at a constant price. 

This constant price would be calculated by subtracting the closing price of Reliance Industries (the demerged firm) on July 19 (T-1 day, where T is the ex-date for demerger) from the price calculated during the special pre-open session (SPOS) on July 20. For instance, 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, JFS is worth Rs 150. 

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. 

Jio Financial Services

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. 

“If the spun off business/entity hits the price band on both days during the first two days of these three days, the exclusion date will be delayed by another three 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,” proposed the Nifty Indices – Methodology Document, July 2023. 

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

Analysts predict that JFS will be listed within the next 2-3 months.  

Axis Securities advised investors to purchase Reliance Industries shares before the record date, July 19, as it believes it is a more cost-effective approach to purchase Jio Financial Services, which is expected to list at Rs 160 per share. JFS is worth Rs 168 per share, according to Nuvama. 

According to Axis Securities, Jio Financial Services is valued at Rs 1,08,597 crore in treasury stock at one time RIL’s treasury stock valuation. According to Axis Securities, the company’s total outstanding shares are 676.6 crore, meaning that each share is worth Rs 160 per share.