Reliance Industries will have Jio Financial Services holding 413 million treasury shares, accounting for 6.1% of its outstanding shares.
The Reason for Demerger?
Reliance Industries demerged to create Reliance Strategic Investments Limited also known as Jio Financial Services (, focusing on Financial Services Business. This move aims to enhance management focus and operational efficiency in the financial services sector while providing investors with clear insights into individual business performances. Furthermore, the demerger can positively impact market perception, leading to increased investor interest in both RIL and RSIL.
The demerger of Reliance-JFSL.
RIL board announces acquisition cost for RIL and RSIL before demerger. According to the latest exchange filing, after the demerger, the cost of acquisition for Reliance Industries Ltd would be 95.32%, while Reliance Strategic Investments Limited would hold the remaining 4.68%.
Jio Financial Services (JFSL) shares traded at Rs 261.85 per share during a pre-open call auction session on NSE. Considering the demerger, the share price of Reliance Industries (RIL) declined to Rs 2,580.
The Approvement of the Scheme
NCLT, Mumbai Bench, approved the Scheme of Arrangement between RIL, its shareholders, creditors, and RSIL, its shareholders, and creditors. The scheme includes the demerger, transfer, and vesting of the Financial Services Business from Reliance Industries Limited to RSIL on a going-concern basis. RSIL will issue equity shares to the shareholders of Reliance Industries Limited as part of the arrangement, in accordance with the provisions of Section 2(19AA) of the Income Tax Act, 1961.
What is the Cost of Acquisition look like for the Entity?
The constant price for JFSL was determined by subtracting RIL’s Wednesday closing price from the price derived during today’s special pre-open session.
NSE will include Jio Financial in various indices like Nifty50, Nifty100, Nifty200, Nifty500, and more on a temporary basis. After market hours on Wednesday, the exchange will create a dummy symbol for Jio Financial and add it to the applicable indices. Jio Financial will remain part of these indices at a constant price until it is officially listed on the exchanges.
Is the Demerger Beneficial for the Investors?
The demerger of Reliance Industries (RIL) into Reliance Strategic Investments Limited (RSIL) can benefit investors. It creates focus and efficiency in the financial services sector, provides clarity on each business’s performance, and improves market perception. Investors get diversification opportunities and can make informed decisions. Professional advice and research are essential for wise investment choices.
To Summarize.
In summary, Reliance Industries Limited demerged its Financial Services Business to create Reliance Strategic Investments Limited (RSIL) as a separate entity. The National Company Law Tribunal, Mumbai Bench, approved the Scheme of Arrangement, allowing for the demerger and issuance of equity shares by RSIL to the shareholders of Reliance Industries Limited. The demerger was sanctioned in accordance with the Income Tax Act, of 1961.
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