Jio Financial demerger: All you need to know about RIL shares, price discovery, why the special session, etc

RIL-Jio financial demerger: The financial arm of Reliance Industries, Jio Financial Services, will be demerged from parent company today and will be listed separately on NSE and BSE. It will also be included in Nifty50, Nifty 100, Sensex, etc. In October, the oil-to-retail conglomerate had announced that it will demerge its financial services business and list it separately on the stock exchanges under Jio Financial Services Ltd, in a move to tap the growing demand for new age financial services for retail and small-business customers.

The shareholders who own Reliance stock today will receive one equity share of Jio Financial Services for every one share held of RIL.

Jio Financial Price Discovery

The stock exchanges will be holding a special pre-opening trading session for RIL today between 9 am and 10 am and the RIL shares will start trading at 10 am. This session will help determine the adjusted share price of RIL after the demerger of Jio Financial Services. During this session, one can only place, cancel, or modify the orders.

How will price discovery work? 

To use an example,

a) During the special session on Thursday, RIL trades at ₹2,600.

b) And the closing price of RIL on Wednesday was ₹2,800.

c) After the demerger, the spun-off business JFS (Jio Financial Services) will have a separate listing and its stock price will be set at ₹200 (2,800-2600)

Jio Financial will be added in the indices, including Nifty 50, at a price of Rs. 200 per share. It will remain in the indices at this constant price of Rs. 200 until Jio Financial is officially listed as a separate entity. As a result, temporarily, Nifty 50 will have 51 stocks, explains Pravesh Gour, Senior Technical Analyst, Swastika Investmart.

Why the special Pre-open session

In April, the stock exchanges revised the way they will handle demergers. As per the new norms, demerged entities will be retained in the index if a special pre-open session is conducted by the exchange. The demerged business will be included in the index at a constant price.

Only limited orders will be accepted during this session, as per NSE website.

Also read: RIL-Jio demerger: Special pre-open session for Reliance, what to expect

On what basis the opening prices will be determined?

The price at which the highest orders will be matched becomes the opening price of the stock at 10 am when normal trading resumes for RIL.

“The opening price shall be determined based on the principle of demand and supply mechanism. The equilibrium price will be the price at which the maximum volume is executable. The equilibrium price determined in call auction of pre-open 2 session is considered as open price for the day,” as per the NSE website.

What happens on Jio Financial listing?

Once Jio Financial stock is listed on a future date, it will be removed from the indices three days after its listing, subject to certain price conditions. For example, if Jio Financial lists on day T, it will be delisted from the indices at the end of T+3 days.

Which indices will include Jio Financial?

The demerged entity will be included in many NSE, BSE indices. BSE had announced that Jio Financial will be added to 18 of the S&P BSE indices, including the S&P BSE Sensex.

For NSE, Jio Financial will be included in the Nifty 100, Nifty 200, and Nifty 500 indices, as well as other sectoral indices.