Shares of Jio Financial Services hit the lower circuit immediately at open on Tuesday, a day after the stock listed below market expectations.
What Happened: The highly-anticipated listing of Jio Financial Services, a spin-off from Mukesh Ambani’s Reliance (RIL), had a rocky start on Monday, with shares plunging 5% on their first trading day.
Jio Financial initially opened at ₹262 on the NSE, but soon saw downward pressure due to block deals, eventually closing at ₹248.90. This was below the pre-listing price of Rs 261.85, which was established during a special price-discovery session on the demerger record date of July 20.
As Jio Financial is under the T segment for its first 10 days of trading, it is subject to a 5% circuit limit, prohibiting intraday and BTST (buy today, sell tomorrow) trades.
Who’s selling: The listing price fell short of market expectations, which were around ₹300 apiece, due to selling pressure from institutional investors of RIL who were likely hesitant to hold a non-banking financial company (NBFC) stock in their portfolios. Mutual funds, which received one Jio Financial stock for every RIL stock owned, were also expected to sell around 145 million shares of the newcomer.
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Analysts believe that the stock may face short-term selling pressure as it currently trades well above its estimated fair value of ₹150-₹180 per share based on stake valuations.
Despite the initial setback, Jio Financial’s long-term prospects appear bullish, given its focus on consumer and merchant lending, asset management, insurance, payments, and digital broking. It has even announced a joint venture with BlackRock to enter the mutual fund industry.
What It’s Worth: Following the demerger, Jio Financial holds approximately 6.1% of Reliance Industries Limited’s (RIL) total share capital, worth ₹1 lakh crore at the current market price.
In terms of market capitalisation, Jio Financial now stands as India’s 34th largest listed company and the third largest NBFC after Bajaj Finance and Bajaj Finserv. Despite not yet initiating its lending operations, the company derives much of its valuation from its 6.1% stake in RIL.
Price Action: Jio Financial’s share price plummeted 5% to ₹236.45 immediately at open on Tuesday to hit the lower circuit – the lowest the price can fall to during the session.
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