reliance share falling

As Reliance Industries gears up to list its demerged financial services subsidiary, Jio Financial Services (JFS), investors and traders should not be alarmed if they witness a drop in Reliance Industries’ (RIL) share price. The reason for this lies in the pre-open auction session scheduled on July 20 from 9 am to 10 am, aimed at determining the market’s valuation for JFS as a separate entity.

During this pre-open session, the market will try to gauge the fair value of RIL post-demerger, without the inclusion of JFS. This difference between RIL’s closing price before the demerger and the discovery price during the auction will set the initial stock price for Jio Financial Services. So, if RIL’s closing price on July 19 is, for example, Rs 2,000 per share, and the pre-open auction settles at Rs 1,800 per share on July 20, then JFS shares will be valued at Rs 200 apiece.

Regarding the valuation of Jio Financial Services, analysts estimate the value of JFS shares to be in the range of Rs 160 to Rs 190 each. This demerger is a spin-off of RIL’s 6.1% treasury shares, which have been valued at Rs 117 apiece by Nuvama. The demerger accounts for 4% of Reliance Industries’ closing price on July 14, which was Rs 2,740.7 per share. Without considering the 30% holdco discount, the valuation per JFS share would be Rs 168, constituting 6% of the closing price.

Axis Securities, on the other hand, values Jio Financial Services at the treasury stock valuation of Rs 1,08,597 crore (equivalent to 1x RIL’s treasury stock valuation). Considering the total outstanding shares of 676.6 crore, each share’s value would be Rs 160. The shareholding pattern for JFS will remain the same as that of Reliance Industries.

It’s worth noting that Jio Financial Services’ business model is yet to be disclosed, and Axis Securities justifies its valuation based on the assumption that the company might leverage regulatory funds if the entire allocation is not directed towards JFSL.

As the market awaits the listing of Jio Financial Services, investors and traders are keeping a close eye on the pre-open auction to determine the impact on Reliance Industries’ share price and to assess the true value of the newly demerged entity.



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