Under the Reliance-JFSL demerger, shareholders of Reliance will get one share of the demerged entity for every share owned by them in the oil-to-telecom conglomerate
Mukesh Ambani-led Reliance Industries Ltd (RIL) demerged its financial unit, Jio Financial Services (JSFL) on 20 July. The share price of RIL ex-JFSL has been discovered at Rs 2,580 per share while Jio Financial Services is valued at Rs 261.85 per share after the pre-opening session on the NSE and BSE. The ratio for demerger is fixed at 1:1.
Reliance announced the demerger of its financial services arm Reliance Strategic Investments Limited (RSIL) as part of its group restructuring. The demerged entity has been renamed Jio Financial Services Limited (JFSL), which is likely to be listed soon. The demerger of the financial services unit involves a spin-off of Reliance Industries 6.1 per cent treasury shares.
"The market discovered price of Rs 261.85 per share of Jio Financial Services has come much higher than most brokerages’ estimates. This high price is a reflection of the market’s assessment of Jio Financials’ potential. The wide reach of JFSL through RIL’s other business segments like Reliance Retail has the potential to grow the company at a fast pace for many years to come. The market is discounting this potential," said Dr VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
How Will The Demerger Impact Shareholders?
Under the Reliance-JFSL demerger, shareholders of Reliance will get one share of the demerged entity for every share owned by them in the oil-to-telecom conglomerate. Reliance had fixed 20 July as the record date to identify eligible shareholders for the allotment of shares of the demerged entity. So, if an investor owns 100 RIL shares on 20 July, he/she will be eligible to receive 100 Jio Financial Services shares. The shareholding pattern at JFSL will be the same as at Reliance Industries.
How Was The Share Price Calculated After Demerger?
During the special pre-opening session, traders had the opportunity to watch the market sentiment and assess the fair value of Reliance Industries stock post-demerger. The difference between Reliance’s pre-demerger closing price and the discovery price during the pre-open auction was used to calculate the initial share price of Jio Financial Services.
Reliance’s stock price has been found at Rs 2,580, when the pre-opening session ended at 9.45 am. This was at 9.2 per cent discount from Wednesday’s closing price of Rs 2,841.85 per share on the National Stock Exchange (NSE). Shares of Jio Financial Services are now valued at Rs 261.85 after the pre-open auction session.
Listing Date
Jio Financial Services is expected to be listed on stock exchanges in 2–3 months. Apart from benchmark Nifty 50, Jio Financial will also be included in other indices including Nifty 100, Nifty 200, and Nifty 500 among others. It will be the 51st stock on the Nifty 50 as part of the arrangement. The demerged entity shall be removed from the index after the end of day on the third day of actual listing.
How Will The Capital Gains Tax On JFSL Shares Be Calculated?
According to a statement by Reliance, the post-demerger cost of acquisition of RIL shares is 95.32 per cent and that of JFSL shares is 4.68 per cent. For example, if you had purchased the Reliance share on 19 July at Rs 2,840 then value of your Reliance holding would be 2,707 and Rs 133 for JSFL holding. So, Rs 133 in effect is the acquisition cost of Jio Financial Services. Capital gains will be calculated on the difference between the price at which the shares are sold excluding Rs 133 (assuming you bought the shares at Rs 2,840).
However, the tax liability will only occur at the time of the sale of shares by the investor. Currently, investors cannot sell JFS shares as it will remain at a constant price in all the indices where Reliance is present.