Reliance Begins Spinoff Process, Meeting To Take Place On May 2 to Approve Jio Financial Demerger

Reliance Industries Ltd is gearing up to spin off its financial services business by commencing the process of its demerger. Pursuant to the National Company Law Tribunal March 27 order, on May 2, 2023, a meeting will be held among the creditors and shareholders of Reliance Industries. The purpose of the meeting is to consider and approve the proposed scheme of arrangement between Reliance Industries Limited and Reliance Strategic Investments. Following the approval, the shares of Reliance Strategic Investments will be rechristened to Jio Financial Services. The company said in an exchange filing that it will also be listed on NSE and BSE.

Additionally, shareholders of Reliance Industries will obtain one share of the demerged entity with value of Rs 10 each for every one share held in RIL. The approval of the board for the demerger came in October, last year after the company made the announcement. It stated in the announcement that Reliance Strategic Investments would become Jio Financial Services and that KV Kamath, former CEO and MD of ICICI Bank, would serve as the new company’s non-executive chairman.

In order to provide sufficient regulatory capital for lending to consumers and businesses, Jio Financial Services will acquire liquid assets (including treasury shares) from Reliance Industries’ financial services division. Jio Financial Services will also incubate other financial services verticals, including insurance, payments, e-broking, and asset management for next three years from RIL.

Reason Behind the Demerger

While talking about the spinoff of its financial business into a separate entity, RIL said, “Further growth and expansion of the Financial Services Business would require differentiated strategy aligned to its industry specific risks, market dynamics and growth trajectory. The nature and competition involved in the financial services business is distinct from the other businesses and it is capable of attracting a different set of investors, strategic partners, lenders and other stakeholders.”

As per brokerage firm Macquarie, Jio Financial Services will become the fifth largest financial services firm in India and will be valued at more than Rs 1.52 lakh crore.