Jio Financial Services To Be Listed On August 21

NDTV Profit

Jio Financial Services will start trading on the BSE on August 21 post demerger. In conversation with  JST Investments’ Aditya Shah.

Transcript

00:00 Hello and welcome to BQ Prime. A very good afternoon to all the viewers. I am Neeraj

00:06 Dhadia. A breaking news that we are picking up that has just come in a couple of minutes

00:10 ago is with regards to Geo Financial listing deal that has been announced and will be listed

00:15 on the 21st of August, which is Monday. In fact, this is an interesting point when FTSE

00:20 just removed Geo Financial Services, you know, and this was mainly on the back of no information

00:26 being received with regards to the listing date. On the back of this news, if you see

00:31 Reliance Industries itself, the stock has seen a spike. If you see, the day's low is

00:38 2180, from there it's hit a high of, sorry, that was the 52-week low, but today's low

00:44 was around 2508. From there it's gone to around 2577, 2563 as we speak. So, good up move,

00:51 a 1% up move and that could come in the support in terms of markets as well as we speak. Joining

00:57 us on the show to discuss more on the same is Aditya Shah, CIO at GST Investments. Aditya,

01:04 good afternoon and welcome to the show. Good afternoon, Neeraj. Thanks for having me. Always

01:10 a pleasure to speak to you. Aditya, the date with regards to where Geo Financial Services

01:15 was concerned was something which was much awaited by the markets as well. As we know,

01:20 the shares have already been allotted to the shareholders of Reliance Industries last week.

01:26 Your initial comments with regards to the listing date and what you hear? It is a procedural

01:34 process that has taken place, but the bigger important point that we need to consider is

01:38 a new baby out of Reliance is coming out and Reliance is now firmly getting into the financial

01:45 services industry, be it insurance, be it AMC, be it PurePlay and BFC. So, in my opinion,

01:52 I am very excited just as Geo disrupted the technology world, the mobility world. Now,

01:59 we need to see how the Geo Financial Services tries to disrupt many services across financial

02:06 services, be it insurance, be it AMC or be it the PurePlay lending per se also. So, very

02:14 excited. At this stage, the business is very, very small, but as the company takes steps

02:22 to expand its business, you will find it could become one of the top NBFCs, the spot that

02:28 has been left over by HDFC Limited. Right. With this, you know, this notification comes

02:35 a day after FTSE said that JFS will be removed from FTSE indices from the 22nd of August

02:40 because of no intimation of the listing date. And here you go, you hear of the listing date.

02:45 Does that anything, does that, you think that would change anything from its inclusion back

02:50 to FTSE? These are all very technical factors. Of course, the date for the listing was anyway

02:58 going to be intimated. So, I think it is a technical factor. And in my opinion, JFS could

03:06 be included in most of the indexes as Reliance puts its heavyweight behind the company and

03:12 the company starts to ramp up its business across most of the financial services. So,

03:17 I think that's a very short-term phenomenon. Longer term, it is a good candidate. As you

03:23 know, it is already a part of the index, of the Nifty index, and it could become part

03:27 of all the indexes. Right. Another aspect is for the benefit of the viewers, Aditya,

03:34 if you could explain, I mean, they've said that the script will be in trade-to-trade

03:39 settlement for 10 trading days. For the benefit of the viewers, what would this mean, if you

03:44 could explain that? Yes. So, whenever a new stock gets listed, in order to curb speculation

03:50 and in order to curb options trading on a stock, what really happens is the indexes

03:57 introduce them to a trade-to-trade settlement. What this really means is that you cannot

04:01 do any leverage trades on the stock, as well as you cannot do any options trade on the

04:06 stocks. For the first 10 days, in order to curb massive speculation, that really happens,

04:12 you will be only able to buy or sell the geo-financial stock with the cash that you have. No other

04:19 leverage positions will be allowed. This has been done in order to curb speculation. And

04:25 point number two is efficient price discovery. As the stock continues to trade, the exchanges

04:31 want efficient price discovery. So, this is a good mechanism that has been introduced

04:35 by the exchanges in order to safeguard the investor interest. Right. And then, in terms

04:44 of the dummy ticker, after the price discovery was fixed at 261.85 basis that the NBFC's

04:51 market capitalization totals to around 1.66 lakh odd crores. Now, this would actually

04:56 make it the second largest NBFC, I beg your pardon, in the country. How do you look at

05:03 it from a business perspective? Because, right now, immediately, it becomes number two.

05:11 So, basically, what is happening here is Reliance's firepower is fueling the market cap for this

05:17 company. As time really goes on, they will essentially be in three to four businesses,

05:22 which could be the whole bucket of lending. The second bucket could be insurance. They

05:26 have applied to the regulator for an insurance license. And we already know the third business

05:31 is they have tied up with BlackRock to set up an asset management or a mutual fund business.

05:37 So, these two to three businesses will be the ones which will be dominating the business.

05:42 And you know the firepower of Reliance. The distribution is one of their biggest advantages

05:46 that they have got. So, I feel there will be a massive scale up and there will be a

05:50 very quick scale up of the business from Jio. Right. So, if you have to look at a like to

05:57 like comparison, what would the peers look like? Because, as we are talking about the

06:03 various businesses, yes, there is interest in lending. We're talking about insurance,

06:08 payments, digital broking, asset management, merchant lending, a whole host of things.

06:15 And they've already announced a 50-50 JV with BlackRock to enter the mutual fund industry

06:20 as well. So, taking that into consideration, who would become a like to like peer according

06:25 to you? In NBFC, there is no like to like comparison. However, in banks, most top banks,

06:32 for example, an HDFC bank or an ICICI bank, which has got integrated insurance business

06:38 as well as an asset management business would be a direct comparison with Jio. However,

06:43 Jio's cost of fund will be higher as it will not be a bank, but it will come down as time

06:50 really goes on and it diversifies its business. It will be very interesting to see when they

06:55 set up their NBFC, it will be a deposit taking NBFC or it will be a non-deposit taking NBFC.

07:01 So, PRP, you can directly compare it with the likes of HDFC bank or a Kotak bank or

07:06 ICICI bank for that matter as well, but not with any NBFCs because it will be a far, far

07:12 bigger and a far, far diversified play as compared to any other NBFC, for example, like

07:16 a Bajaj Finance or a Chola Mandalam Finance or anything of that.

07:20 Right. So, another aspect was, you know, everyone expected that at the AGM is probably when

07:28 we would hear of the listing date, the roadmap, etc., which would be on the 28th of August.

07:36 And interestingly, what's happening is this time the AGM is in the afternoon and not in

07:40 the morning where usually it is. What, according to you, would be the key takeaways from the

07:45 AGM where there would be, you think there would be announcements with regards to roadmap

07:49 of future plans in the financial service industry?

07:52 Absolutely. There would be the future roadmap of Jio as well. We hear that a laptop is going

07:58 to get introduced in the AGM as well as on the future roadmap of how are they going to

08:05 start to start to get the insurance license as well as the AMC license. So, in my opinion,

08:12 this will be a landmark AGM again where Jio will signal to the financial services world

08:17 that it is coming to the world to disrupt it. And we will see very new products and

08:23 those new products as with Jio always will try to disrupt the entire orientation of the

08:29 industry. So, in my opinion, that is what will happen in the AGM and it is a very positive

08:35 step for the entire industry.

08:37 Right. And my last question coming to you Aditya is, yes, any holders of Reliance Industries

08:46 would have got a share of Jio Financial Services. What would you advise them to do post listing?

08:53 And the second part to it is someone who does not have or is not allotted a Jio Financial

08:58 Services share. Do you think it would be good to enter immediately on listing?

09:04 So, pure play, I would suggest anybody who has got the shares because of their holding

09:09 in Reliance. I would like to hold on to this talk because as I say, the music has just

09:18 started. The business will do exceptionally well over the next 10 to 15 years. I would

09:23 advise investors to be long term investors here per se and not a short term investor

09:27 because the market cap is already one and a half lakh crores. It would be very difficult

09:32 for investors to make a return in the short term. Point number one. Point number two,

09:36 anybody who is looking to enter the business, enter the Jio Financial Services stock, I

09:41 will suggest them to wait for a while. Let Jio Financial Services come and clear out

09:47 their businesses. Let them come out with their earnings presentation. And if there is a correction,

09:52 then only you should be entering because at one and a half to two lakh market cap, the

09:56 upside in the near term could be very limited. However, the upside in the longer term will

10:01 definitely be there. Right. Any clarity you have in terms of the

10:06 valuation side of it? Not really per se because you know, valuing

10:13 an insurer, valuing an AMC does not really mean that you value them on P. The valuation

10:18 metrics there are very, very different. And also, in terms of valuing a lender, that also

10:23 is very different. So once we have a consolidated earnings presentation or an earnings day with

10:29 the Jio management, then we will be able to figure out what would be the estimated valuation.

10:35 Right now at this stage, no clarity is there per se.

10:38 Right. So I think lots that is still, you know, not really, it's still kept undercover.

10:46 So a lot of things that will have to be uncovered as well. And probably the AGM will be the

10:51 right time where we will hear more as well as on the listing date as well. If the management

10:56 is going to speak, then they will be giving us more details and you know, what could be

11:00 expected overall from Jio Financial Services. Thank you Aditya so much for joining us on

11:05 the show and sharing the view. So that's with regards to Jio Financial Services. On the

11:09 back of which, if you see Relax Industries, which has seen a good move, I mean, almost

11:14 a little over 1% is the spike that we've seen as we speak. But if you see, because of its

11:20 impact with regards to Nifty 50 as well, you go clearly we did see a spike come in in terms

11:25 of Nifty 50 as well, but a slight cool off from the day's highest levels. We were just,

11:30 you know, in the green for a couple of minutes. And from there, we've come back into the negative

11:36 as well. That's all that we have on this session and all about Jio Financial Services that

11:41 will be listing on the 21st of August. We will give you more coverage throughout the

11:46 weekend and on Monday as well as to what could be expected out of it. That's all that we

11:51 have on this session. Thanks for watching and lots more lined up on the other side.

11:54 Please stay tuned to BQ Pride.

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