- Date : 23/08/2023
- Read: 3 mins
LIC acquires 6.66% stake in Jio Financial Services via a demerger, signalling a strategic expansion into the non-banking financial sector.
In a calculated move, the Life Insurance Corporation (LIC) has acquired 6.66% stake in Jio Financial Services. How this was achieved is noteworthy—a strategic demerger that holds significance beyond the surface.
Highlights -
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LIC acquires 6.66% of Jio Financial Services through careful demerger execution.
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Jio Financial Services made a debut on 21-Aug-23 with a market cap of Rs 1.60 lakh crores.
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The purchase cost equals 4.68% of Reliance's pre-demerger valuation.
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Potential synergies for innovative products and a stronger loan portfolio.
The deal details
LIC's recent acquisition of a stake in Jio Financial Services is a strategic step that speaks volumes about the company's vision and intent. This demerger action was led by Reliance Industries, the parent company of Jio Financial Services.
Strategic implications
This move aligns with LIC's broader investment strategy and signifies its interest in the financial sector. By acquiring a substantial stake in Jio Financial Services, the LIC aims to tap into the potential growth prospects of the financial services industry. This strategic alignment could pave the way for mutual benefits and synergies between the two entities.
Riding the initial wave - Market debut and fluctuations
Jio Financial Services made its stock market entry on 21-Aug-23 with a market capitalisation close to Rs 1.60 lakh crores. However, the initial trading journey wasn't without its ups and downs. The stock witnessed a minor 1.20% premium during its listing at Rs 265 per share; the stock faced a subsequent dip of 3.85%, eventually locking at Rs 251.75 due to lower circuit limits. For the second consecutive session, shares were locked at a 5% decline to Rs 239.20 on the BSE.
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Caution in trading: The 'T' group admission
Notably, Jio Financial Services shares find themselves in the 'T' group securities on the BSE, an interesting inclusion with implications. This categorisation restricts intra-day trading, a strategic move that may indicate a cautious approach to stabilise the initial trading performance.
The future potential of projections
Foreign brokerage CLSA offers valuable insight into the future. With a $2.5 billion infusion of liquid assets through the demerger, Jio Financial Services has the potential to support a substantial loan book ranging from $13 to 15 billion. These projections shed light on the growth possibilities that lie ahead for this newly formed financial entity.
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Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.
