Reliance Industries Ltd has initiated the process for the demerger of its financial services business and will hold a meeting of secured and unsecured creditors, and shareholders on 2 May to get the mandatory approvals.
According to the company, its shareholders will get one share in the demerged entity for every share held in RIL.
After the demerger, shares of Reliance Strategic Investments, which will be renamed as Jio Financial Services, will be listed on the NSE and the BSE, it said in an exchange filing. Jio Financial will also acquire the liquid assets (including treasury shares) of RIL’s financial services arm to bring adequate regulatory capital for lending to consumers and merchants, and to incubate other financial services verticals, including its insurance, payments, e-broking and asset management arms for the next three years.
After demerger, Jio Financial’s authorized share capital will increase significantly from ₹232.1 crore to ₹15,005 crore. The company’s paid-up share capital will also swell from ₹2.33 crore to ₹6,765.67 crore. This will give it a significant lending power, while leveraging Jio’s strength in fintech.
The financial services arm will own a 6.1% stake in RIL, or about ₹1 trillion, according to the current market cap of RIL. After the transfer of Reliance Strategic Investment’s assets Jio Financial will be valued at over ₹1.52 trillion to become the fifth largest financial services firm in India, according to a November 2022 report by Macquarie Research.
Jio Financial will have a large balance sheet, not run an asset-light model and most product offerings will give it a competitive edge over others, it said. In October, RIL had said that Jio Financial will enable shareholder participation from the outset on a fully digital financial services platform, which is well-capitalized, to tap into the high-growth financial services business.
The structure of Jio Financial will allow it to partner with strategic or financial investors, enhancing strategic focus and supporting its growth drivers, RIL had said.
The demerger of RIL’s financial services business into JFS through a scheme of arrangement was approved by RIL’s board in October, with an aim of capitalizing on the growing demand for new-age financial services for retail and small-business customers.
“JFS will be a truly transformational, customer centric and digital-first financial services enterprise offering simple, affordable, innovative and intuitive financial services products to all Indians. JFS will be a technology-led business, delivering financial products digitally by leveraging the nation-wide omni-channel presence of Reliance’s consumer businesses. JFS is uniquely positioned to capture multiple growth opportunities in financial services bringing millions of Indians into formal financial institutions,” Mukesh Ambani, chairman and managing director, RIL, had said in October.
