Jio Financial Services, the demerged financial services unit of Reliance Industries, hit the lower circuit for the second straight day on Tuesday amid sustained selling by passive funds.
Jio Financial Services will now be removed from all relevant exchange indices from August 28, instead of August 23. “Since the stock has hit lower circuit limit for two consecutive days, the Index Committee has determined to postpone the removal of JFSL from all the S&P BSE Indices by another three days,” read a notice put up by the BSE.
The company’s shares were locked at ₹236.45 on the NSE after hitting the five per cent per cent lower limit. On the BSE, the stock remained at ₹239.2 apiece on close.
Index funds were expected to offload shares worth $465 million ahead of its exit from key indices post-listing.
Should Jio Financial hit lower circuit for the next two days, the removal date will be deferred by another three days. Additionally, if JFSL does not hit the lower circuit limit for the next two days, but hits the lower circuit limit on the third day, the removal of JFSL from all S&P BSE Indices will be deferred by another three days, said the exchange notice.
The stock will have a five per cent circuit filter for 10 trading days from the date of listing. There will be no intraday trading during this period.
The shares are still trading at a price above the ₹179-224 value that some analysts had earlier ascribed to the company. Analysts believe the current price to book value is on the higher side when compared to a lot of existing NBFCs and banks, but that reflects the potential that investors see in it to disrupt the fintech space.
“We expect such euphoric valuations to hold for a while amid expectation of robust organic growth as well as probable opportunities of inorganic growth available in the financial domain,” said a note by Incred Equities.
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The balance sheet size of Jio Financial Services is at ₹1.1 trillion as of March 2023, according to Jefferies. On the liability side, net worth is at ₹1.1 billion, of which, ₹671 billion is from MTM gains mostly on investments in RIL which had cost of ₹154 billion. This implies that core net worth (ex-cost of investment in RIL shares) is at ₹316 billion, said Jefferies.
Jio Financial Services also has investments in preference shares of associates and JVs worth ₹176 billion. On the asset side, investments are at ₹1.1 trillion, which include MTM gains and the majority of residual assets are liquid assets, the brokerage said.
The discovered price of ₹262 per share implies a market cap of $20 billion and a valuation of 1.9x price to book value.