Jio Financial Services demerger and listing: What Reliance shareholders need to know? | Techno Glob

Shares of RIL witnessed volatility during the one-hour Muhurat trade on Monday. Stocks hit record highs 2,501 units in the trading session before the close 2,479.70 apiece on BSE 7.75 or 0.31%.

RIL is the largest company in terms of market share. It has market share 16.77 million as of October 24.

Here are the key important plans of RIL that shareholders should know about:

List of NBFC Group:

RIL’s board has approved a scheme of arrangement between the company, Reliance Strategic Investments (RSIL) and their respective shareholders and creditors. Under the scheme, RIL will demerge its financial services arm into RSIL, which will be renamed Jio Financial Services (JFSL). The new firm will be listed on the Indian stock exchanges.

Currently, RSIL is a wholly owned subsidiary of RIL and a Non-Depository Systemically Important (ND-SI) Non-Banking Financial Company registered by RBI.

Further, under the scheme, RIL shareholders will get 1 equity share in JFSL at face value. 10 each for 1 fully paid share 10 RILs (Ratio of Breeding) were conducted.

The new firm is expected to build a large digital fintech platform for all Indians. This may present several growth opportunities in the financial services landscape. The corporate and capital structure enables RIL shareholders to participate in an exponential growth business.

Restructuring of EPC resources:

In another development, RIL’s board has approved a scheme under which EPC and Infrastructure Integration of Reliance Projects and Property Management Services (RPPMSL) is proposed to be demerged to RIL.

According to the statement, the focused EPC undertaking will combine and synergize the group’s engineering capabilities and expertise. The EPC company will play a crucial role in the implementation of RIL’s major projects in O2C, New Energy and 5G deployment.

Also, implementation of these mega projects will require significant mobilization of global technologies and EPC resources. Increasing infrastructure spending across geographies in oil and gas, chemical, telecom, and renewable energy is expected to drive significant demand for EPC resources.

The new EPC commitment will facilitate internationalization by establishing EPC centers of excellence in strategic offshore locations. It will be aligned with existing subsidiaries of RIL

USA and Dubai. It also includes new subsidiaries in Singapore and the UK.

RIL’s Q2FY23 earnings:

In the second quarter of FY23, RIL reported consolidated net profit 13,656 million dollars – less compared to the same quarter last year. Quarterly, RIL’s PAT fell by 24%. Consolidated income from operations increased by 33.7% 2.32 million compared to the 2323 quarter 1.74 lakh crore in the second quarter of the previous fiscal.

Among the key highlights during the quarter — the company’s Reliance Retail and Jio posted record quarterly EBITDA performance. 4404 million and 12,011 crore, an increase of 51.2% and 29.2% respectively. Also, Reliance Retail became the first Indian retailer to have more than 50 million square feet of retail space.

Additionally, the oil and gas business witnessed a 3x jump in quarterly EBITDA during the quarter. However, the EBITDA of the O2C business decreased by 5.9% 11,968 million in 2Q23, but revenue grew by 32.5%. The company’s exports were around 86,382 million, up 57.5%.

What should investors do?

According to ICICI Direct note, RIL’s long-term prospects and dominant position in each of its product and service portfolios provide the leverage for long-term value creation. RIL’s consumer business will be the growth driver going forward. However, refining product cracks have moderated compared to the peaks seen in 23Q16.

“We maintain our HOLD rating on the stock,” the brokerage note added, “We rate RIL 2,700 based on SoTP.”

Disclaimer: The views and recommendations expressed above are those of individual analysts or brokerage firms and not of Mint.

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