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Indian billionaire Mukesh Ambani listed his subsidiary Jio Financial Services on Monday, with share prices falling by 5 per cent in their trading debut to give the company a valuation of $19bn.
Last month, Reliance Industries carved out JFS as a non-bank financial services company, setting the stock price at Rs261.85 during a special discovery session to value the company at around 1.7tn rupees ($20.5bn). Shares fell 5 per cent in the first session, hitting their limit.
The drop on the first day of trading reflected investor scepticism about the company, which has yet to lay out details of how it plans to compete against dominant players, such as Bajaj Finance. Analysts expect JFS to buttress the Indian conglomerate’s digital and retail growth through lending, insurance and asset management.
JFS intends to be a “full service financial sector player”, said KV Kamath, JFS chair and former chair of ICICI Bank, at the opening ceremony in Mumbai.
“In this context there are some advantages of being late to the party, because you then have the advantage of riding on all the technological developments which are already visible,” said Kamath. JFS has yet to launch any services.
Investors in parent company Reliance Industries, Ambani’s industrial conglomerate with businesses spanning from petrochemicals to telecoms, were offered one share in JFS for every Reliance share they held.
India has pioneered one of the world’s largest digitisation drives, building out an extensive network of digital infrastructure and connecting almost 1bn to the internet, creating an opportunity for companies to cater to millions of unbanked people.
Analysts expect JFS to focus on lending to merchants and consumers, where it may be able to leverage Reliance Retail’s network of shops and the 400mn mobile subscribers using Jio, its telecom network.
JFS is also branching out into asset management through a joint venture with BlackRock. The deal marks BlackRock’s second attempt to crack the Indian retail market after it sold out of a joint venture with DSP Group in 2018.
In the past, Ambani’s companies have seized market share undercutting rivals. But analysts said this strategy was too risky for a leveraged business like financial services and that JFS would have to establish itself more slowly.
JFS is the first Reliance unit to list in almost 20 years. The company’s market capitalisation makes it India’s third-largest listed so-called shadow bank.