Tomorrow, 2 May, bondholders and shareholders of oil-to-retail conglomerate Reliance Industries Ltd (RIL) will vote on a proposal with far-reaching implications: the creation of a financial behemoth. India’s largest company by market capitalization—Rs 16.4 lakh crore (~$201 billion)—seeks to demerge its financial-services business into a separate unit and list it on the bourses.
RIL run by Mukesh Ambani—Asia’s richest man—is famed for two things, in particular. Its capacity to execute large complex projects across sectors, and its financial-engineering prowess. How RIL will fare on execution in the financial-services business is up in the air, but it seems to have aced the financial-engineering test.
It’s a big, complex deal. Various financial-services businesses across RIL and its group companies are being demerged and transferred to Reliance Strategic Investments Ltd (RSIL), a non-banking financial company (NBFC). RSIL, now a subsidiary of RIL, runs a relatively small security security security A fungible, negotiable financial instrument that holds some type of monetary value. -trading business. After the demerger exercise, RSIL will no longer be a subsidiary of RIL and instead issue its own shares to RIL’s shareholders. Also, RSIL will be renamed to Jio Financial Services (JFS).
On its part, JFS envisages a wide canvas—the lending business, digital broking, insurance, mutual funds, payments, etc. RIL’s captive base of hundreds of millions of customers in telecom, retail, and other businesses is the springboard for JFS’s ambitions. It is scouting scouting Livemint Jio Fin looks to hire from other lenders for top roles Read more for top talent: veteran banker and former managing director and chief executive of ICICI Bank KV Kamath will lead the company.
Now, this win-big-or-go-home cred aligns with RIL’s reputation of upending the sectors it sets its sights on—think telecom and retail over the past decade. Some analysts are already assigning top-dollar valuations—up to Rs 1.5 lakh crore Rs 1.5 lakh crore Business Standard Jefferies assigns Rs 134-224 per share for Jio Financial Services Read more (~$18 billion)—to the yet-to-be-listed JFS. That’s close to a tenth of RIL’s market capitalization.
But some are sceptical. “Financial services is not telecom. Deep pockets, [favourable policies], and size don’t necessarily translate into success here,” said a sector analyst who did not want to be named because they are not authorised to speak with the media.
