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Heavy Buying in RIL Shares to Acquire Jio Financial Stocks Amid Demerger: Buy or Wait?

Heavy Buying in RIL Shares to Acquire Jio Financial Stocks Amid Demerger: Buy or Wait?

Written by Sanjay Kumar

Reliance Industries, led by Mukesh Ambani, holds the title of India’s most valuable company, with a market capitalization of approximately INR 1,882,903 crore as of 15 July 2023. Over the past five days, the share price of Reliance Industries Ltd (RIL) has experienced a significant surge. This increase in value follows the announcement by the company that July 20 will serve as the record date for the demerger of Jio Financial Services.

On July 8, the company fixed July 20, as the record date to determine shareholders entitled to receive shares in its newly formed financial services entity. The demerger involves Reliance Strategic Investment (RSIL), which will be rebranded and listed as Jio Financial Services.

The heavyweight stock reached a record high of INR 2,802 on the BSE on Wednesday (July 12), marking a 1.37% increase. In the past five days, the stock has gained 5.17%. At 11:46 am IST on Thursday (July 13), RIL shares were observed trading 0.62% higher at INR 2,784.95 per share.

The reason behind the frenzy of investors rushing to buy RIL stock lies in the merger deal. As per the deal terms, all RIL shareholders on July 20 will receive one share of Jio Financial Services (JFSL) for each RIL share they own. Consequently, investors have a limited timeframe to acquire RIL shares if they wish to be eligible for JFSL stock.

In an exchange filing, the company said: “In accordance with provisions of the Scheme, Reliance Strategic Investments Limited (“RSIL”) shall issue and allot 1 (One) fully paid-up equity share of RSIL having face value of Rs 10 (Rupees Ten) each for every 1 (One) fully paid-up equity share of Rs 10 (Rupees Ten) each of the Company (“Resulting Company New Equity Shares”) to the shareholders of the Company whose names are recorded in the register of members and/or records of the depository as on the Record Date.”

It is anticipated that billionaire Mukesh Ambani will seek to list Jio Financial Services on the stock exchanges within the next 2-3 months. Market insiders expect the Ambani family to provide more details during the company’s annual general meeting (AGM), although the specific date of the meeting has not been announced yet.

On July 8, Isha Ambani, Mukesh Ambani’s daughter, was appointed as a non-executive director of Jio Financial, the demerged financial services unit of Reliance Industries Ltd.

Another factor contributing to the strong demand for RIL shares is the launch of Jio Bharat. Reliance Jio recently introduced Jio Bharat, an internet-enabled phone priced at Rs 999. This release aligns with the company’s initiative to eliminate 2G networks in India through its ‘2G-Mukt Bharat’ campaign.

According to a press release by Jio, the beta trial for the initial 1 million devices commenced on July 7.

In terms of returns, RIL stock has provided a 3-year return of 43.04%, while the Nifty 100 index has yielded a return of 77.05% (as of the last trading session).

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