The NSE will hold a special pre-trade session for RIL, India’s most valuable company, on July 20 in the wake of the demerger of its financial services business. ET looks at the run-up to the event — and what it means for RIL shareholders.
What is changing at Reliance Industries?
What is in it for Reliance shareholders?
Under the demerger arrangement, shareholders of Reliance will get one share of the demerged entity for every share held by them in the conglomerate. Reliance has fixed July 20 as the record date to determine eligible shareholders for the allotment of shares of the demerged entity. The record date is the day when a company finalises its records to identify the eligible shareholders for a corporate action like demerger. So, if an investor holds Reliance shares on July 20, she will be eligible to receive Jio Financial shares. The shareholding pattern in Jio will be the same as Reliance Industries.
Why is NSE holding a special session for RIL on July 20?
It will be a special pre-open session for the purpose of price discovery in Reliance Industries shares (excluding the financial services business following the demerger). The difference in Reliance’s share price derived during this session and Reliance’s closing price on July 19, a day before the ex-demerger date, will be the ‘constant price’ at which Jio Financial will be included.
Why is Jio Financial being included in key indices?
This is the first time a spun-off entity is being included in the indices after the NSE in April introduced new rules on the methodology of Nifty indices for handling corporate actions involving demergers. Other than the benchmark Nifty, Jio Financial will also be included in other indices such as Nifty100, Nifty 200, and Nifty 500, among others. Jio will be the 51st stock on the Nifty as part of the arrangement. The inclusion of the spun-off entity in the indices is aimed at reducing churn in index constituents resulting from demergers, which impacts passive funds. Until now, spun-off entities were excluded from indices soon after the scheme of arrangement for the demerger was approved, forcing passive funds to shuffle the weight of index constituents.
Is Jio Financial’s inclusion into Nifty on account of the demerger permanent?
No. The spun-off business shall be removed from the index after the end of day on the third day of its actual listing. The listing of Jio will happen after the entire process of demerger is over. While the listing date is not known yet, the markets expect Jio to begin trading normally in September or October.
What happens to Reliance’s futures and options contracts on account of the demerger?
Reliance’s equity derivative contracts will expire a day before the record date. This means derivative contracts on Reliance for July, August, and September will expire on July 19. The exchange will introduce fresh contracts for these expiries from July 20.What is the value of Jio Financial shares?
Various analysts have valued Jio Financial between 160 and 200 apiece. Axis Securities said post- demerger, it values Jio Financial Services at the treasury stock valuation of 1,08,597 crore. With the company’s total outstanding shares at 6.77 billion, Jio shares would be valued at 160 per share. Brokerage Nuvama has valued the business at 168 apiece. Centrum Broking said it expects Jio to list in the range of 157 -190 per share, while JP Morgan’s implied value for the business is at 189. Jefferies said it has set 179 per share as the base case value for Jio Financial.