Shares of Reliance Industries Ltd (RIL) jumped over 1.66% in Thursday's trade to Rs 2,622.75 on NSE, following its one-hour special pre-open session. RIL shares settled at Rs 2,580 on NSE in the special pre-open session. This is the discovered price for RIL (ex-financials) at 10 am
For Reliance Strategic Investments Limited (to be renamed as Jio Financial Services or JFS), the share price is derived at Rs 261.85. This was based on the difference between RIL's previous close of Rs 2,841.85 and the price discovered at Rs 2,580 in the pre-open session. For JFS, this constant price will stay
"This derived price of Jio Financial will be considered on a daily basis for Nifty index value computation until it gets listed on the bourses. Once Jio Financial shares get listed on exchanges, the stock will remain as the 51st stock in Nifty 50 index for three days. This will help volatility to settle in and let investors adjust their portfolios," Devarsh Vakil, Deputy Head of Retail Research at HDFC Securities
Active & Passive Fund Managers would ideally maintain JFSL price at Rs 261.8 per share until it starts trading. JFSL will be maintained in all the NSE and BSE Indices at this constant price. The dummy stock will be dropped from all the NSE and BSE indices at the last traded price which is Effective at the open of JFSL listing date + 3 business days
Passive fund managers, mainly Nifty 50 and Sensex, will need not make any adjustments (actual buying or selling) on July 20 , 2023. The end-of-the-day index weightages file will automatically get adjusted to the free float market-cap of existing constituents plus JFS. "There will be churning or weight distribution (actual buying or selling) amongst other member constituents once JFS starts trading and gets excluded on Trading plus third day," said Nuvama in its report
MSCI Standard Index will maintain demerged entity JFS in the Index. “Based on the estimated post-event company full and float-adjusted market capitalisations, Jio Financial Services satisfies the criteria to be added to the Large Cap segment of MSCI Global Standard Indexes," the official circular stated. Meanwhile for FTSE, as per the current methodology, JFSL will get excluded if it doesn’t list within 20 working days post Record Date of demerger
JFSL will be 51st constituent in Nifty50 and 31st constituent in Sensex and on a daily basis will be considered in weight calculations of the Index. However, as it is not traded live so its m-cap and price will remain constant until it lists. Post its listing for three trading days, live m-cap will be considered to calculate weight, according to Nuvama. RIL's weight in Nifty 50 will move to around 10.1% vs appx 11% as on July 19, 2023, and in Sensex, it will move to around 11.8% from 12.8% on July 19 (assuming price of Rs 2,580)
There is no concrete listing day yet and it may take a few weeks to get all the listing approvals. "JFSL being carved out from one of the biggest giants so we expect the listing process should be fast-tracked and quite likely JFSL may be listed in a month’s time (or even lesser)," said Nuvama. Recently, when Piramal Pharma got demerged from Piramal Enterprises, it took almost 45 days for the listing, while NMDC Steel which got demerged from NMDC took almost 4 months
Alongside listing, JFS will not automatically be introduced in derivatives as according to the current methodology, a stock needs to have at least six-month trading history to even qualify for derivative inclusion. After fulfilling all the quantitative qualification criteria for the derivative inclusion, the stock will need SEBI approval (which is quite subjective), said Nuvama
Assuming the hypothetical price scenario for JFS on its T + third day of listing, at Rs 261.8 per share, analysts at Nuvama estimate that Nifty 50 Index passive trackers could sell around 90mn shares, equivalent to appx $290mn. "Sensex Index trackers could sell 55mn shares which is equivalent to appx $175mn. At the current free float - assuming weightages of less than 1% in Nifty 50 and around 1% in Sensex," it said. The calculation is assuming price of other member constituents remain same at closing today
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