Jio Financial Services shares hit lower circuit on its maiden trading session

Shares of Jio Financial Services (JSF) hit lower circuit in maiden trading session after its listing on Monday. The stock was listed at Rs 265 per share, a marginal premium of more than a per cent over its derived price of Rs 261.85 apiece on July 20, which was the record date of the demerger of the company.

The total market capitalization of Jio Financial Services corrected to less than Rs 1.6 lakh crore, which was more than Rs 1.68 lakh crore, when the stock kicked-off its trading on the exchange. The stock is admitted to dealings in the 'T' group securities on BSE, which means intra-day trading in the stock is not allowed.

JFS shares were credited to eligible shareholders of Reliance Industries (RIL), who received shares in 1:1 ratio, implying that every shareholder of the Reliance Industries received one share of the listing boundJio Finance Services. ratio. The discovered share price for JFS based on the record date of the corporate event was much higher than the Street estimates of Rs 160-170 share price.

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Jio Financial Services, the newest and second largest NBFC in terms of market capitalization, is said to focus aggressively on merchant and customer lending thanks to its parent's wide reach in kirana stores. As of June end, Reliance Industries had a total store count of 18,446 with registered customers at 26.7 crore.

Jio Finance Services is currently part of both benchmark indices, and will be removed from Nifty and Sensex after the end of the third day of its listing, which is August 24. The exclusion date would, however, be deferred in certain scenarios. As per Abhilash Pagaria of Nuvama Institutional Equities, there could be passive outflows on the counter.

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Brokerage CLSA noted that other than a stake in RIL, liquids worth $2.5 billion or Rs 33 a piece have been demerged into JFS. This can support a loan book of $13-15 billion, said the foreign brokerage, which noted that even at the speed of the recent annual loan book additions of sector leader Bajaj Finance, JFS will take nearly three years to fully use up the amount.

Most lending financials trade below 3 times price to book ratio, except Bajaj Finance and Chola, which have return ratios of over 20 per cent. This, CLSA said, will need a PAT of over $500 million for core Jio Finance Services. "A large core book reduces the need for JFS to sell its stake in Reliance Industries in the near term."

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Also read: JFS shares list at Rs 265 on BSE; m-cap stands at Rs 1.68 lakh crore