Introduction

Mukesh Ambani’s recent ‘buy 1 get 1’ offer for Reliance Industries shareholders has created a buzz among retail investors. This offer allows all RIL shareholders, as of July 19, to receive Jio Financial Services (JFSL) shares in a 1:1 ratio for each RIL stock they own. The move comes as RIL’s stock reached an all-time high, making its market value an impressive Rs 19.1 lakh crore or $232.8 billion.

What does the offer mean for shareholders?

The ‘buy 1 get 1’ offer means that shareholders who own RIL stocks will receive an equal number of JFSL shares. For example, if you own 100 RIL shares, you’ll be awarded 100 JFSL shares.

Why did RIL choose to demerge JFSL?

The demerger of JFSL from RIL stems from the need for a distinct strategy for its financial services business. As financial services require different investors, partners, and stakeholders, a separate company allows higher leverage for growth and unlocks value for RIL shareholders. JFSL’s business encompasses various financial services, including investment, NBFCs, insurance broking, and payments bank.

JFSL’s Valuation and Listing

JFSL’s value is estimated to be above Rs 1-lakh crore, with varying estimates from different brokerages (Rs 160-190). The share price of JFSL will be determined through a special pre-open session in RIL stock, with the constant price being the difference between RIL’s closing price on Wednesday and the derived price during the special session. JFSL is expected to get listed in the next 2-3 months, and more details will be revealed in RIL’s AGM.

Potential Impact on RIL Stock

After the demerger, RIL’s stock may experience a dip initially, but history shows that it could recover later. For instance, in 2005, when RIL demerged four entities, its share price spiked by 38% in January 2006. Analysts believe shareholders’ wealth could potentially increase by 3%-5%. However, it’s essential to note that RIL’s stock might experience a dip on Thursday due to the demerger, and JFSL’s share price could range from Rs 150-200, resulting in a similar fall in RIL’s stock post-demerger.

Conclusion

Mukesh Ambani’s ‘buy 1 get 1’ offer for RIL shareholders has generated excitement among retail investors. The demerger of Jio Financial Services (JFSL) from RIL aims to focus on the expansion and growth of financial services with a dedicated strategy. Shareholders will receive JFSL shares in a 1:1 ratio for each RIL stock they own. JFSL’s value is estimated to be above Rs 1-lakh crore, and its share price will be determined in a special pre-open session. The demerger may lead to a temporary dip in RIL’s stock, but history suggests it could recover. Overall, the move is expected to unlock value for RIL shareholders and provide growth opportunities for JFSL in the financial services market.