Jio Financial Services, Championed by Ambani, Faces Initial Selling Pressure on Trading Premiere

Jio Financial Services Ltd., the newly established subsidiary of Reliance Industries Ltd., encountered a modest decline in its much-anticipated trading debut, primarily attributed to passive-fund trackers engaging in selling activity.

On Monday, Jio Financial’s stock experienced a dip to as low as 248.90 rupees ($3), marking a departure from its opening price of 265 rupees on the local BSE Ltd. exchange. The company’s shares were initially priced at 261.85 rupees each during a special hour-long trading session last month, placing a valuation of approximately $20 billion on the enterprise.

Following its listing, Jio Financial enters a segment where the buying and selling of shares necessitate the mandatory delivery of shares over a span of 10 trading sessions.

The observed selling pressure on Jio Financial, previously a constituent of India’s vital benchmark indices, anticipates its probable removal from indexes such as the Sensex and NSE Nifty 50 after three days of trading. Passive funds are estimated to have offloaded holdings worth up to $465 million, according to Abhilash Pagaria, an analyst at Nuvama Wealth Management.

Abhay Agarwal, a fund manager at Piper Serica Advisors Pvt and also a shareholder in Reliance, noted, “There are ETFs and index funds who have had to sell shares, they have no choice as the stock will be removed from the index soon.”

Despite this selling pressure, market analysts remain optimistic about Jio Financial’s prospects, attributing its potential success to its synergies with Reliance’s extensive footprint in digital and retail sectors.

This positioning could potentially elevate Jio Financial to a prominent position among India’s leading non-banking finance entities, aligning with Mukesh Ambani’s vision to establish a conglomerate akin to China’s Alibaba Group Holding Ltd. and Tencent Holdings Ltd.

In a statement, Ambani mentioned that Reliance offered one share of Jio Financial for each share held by the parent company’s investors. This strategic move aims to unlock value for shareholders and involve them in a new growth platform, as outlined in Reliance’s recent annual report.

K.V. Kamath, the non-executive chairman of Jio Financial, speaking during the listing ceremony, emphasized the company’s intentions to become a comprehensive financial services provider.

Kamath said, “We intend to be a full-service financial sector player and are already working on products.”

He also noted that being slightly delayed to the market provides the advantage of leveraging existing technological advancements.

Notably, Jio Financial boasts an asset-backed balance sheet, a robust credit rating, and significant support from its founders, positioning it to secure funding at more favorable rates. This is particularly pertinent following HDFC Bank Ltd.’s merger with the country’s primary mortgage lender earlier this year, as highlighted by Prakhar Sharma, a Mumbai-based analyst at Jefferies.

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