Shares of Reliance Industries’ financial services arm, Jio Financial Services (JFS), have plunged nearly 10% in just two trading sessions since the company’s market debut on August 21st.
The stock hit the lower circuit for the second straight day on Tuesday, underscoring the bearish sentiment around the scrip post-listing.
Jio Financial Services made its stock market debut on Sunday, August 21st, listing at Rs 265 per share on the BSE and NSE, a mild 1.2% premium over its issue price of Rs 261.85.
However, the stock failed to hold on to its gains and ended the first day’s trading session at the lower circuit of Rs 251.75.
The selling pressure continued into the next trading session, with JFS again hitting the 5% lower circuit limit on Tuesday. The stock plunged to Rs 239.20, bringing total losses since listing to around 9.5%.
At Tuesday’s closing price, Jio Financial Services’ market capitalization stood at Rs 1.52 lakh crore, down nearly Rs 8,000 crore from Sunday’s market cap of Rs 1.6 lakh crore.
Why is JFS Stock Facing Heavy Selling?
According to market analysts, the sharp correction in Jio Financial Services stock is primarily driven by selling from institutional investors after a muted listing against high expectations.
JFS was among the most anticipated listings this year given its strong parentage under Reliance Industries and India’s growing financial services potential.
However, the tepid listing gains and subsequent decline indicate the market has taken a cautious view on the stock amid current volatility.
With no buying interest at current levels, analysts expect the bears to continue their stranglehold on the counter in the near term.
Jio Financial Services – Valuation Based on Future Growth Prospects
Experts note that Jio Financial Services is essentially being valued based on its future growth potential rather than current financials.
As a new entity, JFS does not have an established track record. But its widespread consumer reach through Reliance’s digital ecosystem along with India’s vast untapped financial services opportunity provides room for optimism.
JFS’ 6.1% stake in Reliance Industries also adds to its investment appeal. But institutional investors appear to be in no hurry to accumulate the stock at present valuations amid market uncertainty.
However, analysts maintain that JFS’ long-term growth prospects remain intact, given the synergies with Reliance’s consumer businesses and focus on financial inclusion.
Jio Financial Services – Business Plans and Growth Focus Areas
Reliance Industries demerged its financial services business and transferred it to Jio Financial Services earlier this year to build a dedicated financial services vertical.
JFS plans to leverage Reliance’s technological capabilities and existing consumer reach to drive financial inclusion and take financial solutions to India’s underserved masses.
The company is expected to launch consumer and merchant lending services using proprietary data analytics and digital delivery.
Other focus segments for Jio Financial Services include insurance, asset management, and digital broking. The company will look at both organic and inorganic growth opportunities in these areas.
Recently, JFS announced a joint venture with BlackRock to offer affordable investment products to retail investors in India. The JV aims to combine BlackRock’s investment expertise with Jio’s digital prowess.
Analysts See Distribution Opportunity in Insurance
According to analysts, JFS’ recently reported plans to enter life and general insurance manufacturing will face stiff competition from over 50 existing players.
But insurance distribution presents a sizeable opportunity for Jio Financial given India’s low insurance penetration.
With an existing insurance broking business and partnerships with over 17 insurers, JFS can rapidly scale up distribution by tapping into Reliance’s vast consumer base.
Building Digital Financial Services Leader
RIL Chairman Mukesh Ambani has outlined the vision for Jio Financial Services to emerge as a leader in tech-enabled financial services for millions of Indians.
Backed by Reliance’s ecosystem and technological firepower, JFS is uniquely positioned to transform India’s digital finance landscape if it can execute effectively.
But it remains to be seen whether JFS can compete strongly across diverse financial sectors comprising entrenched incumbents.
While near-term sentiment around the stock appears weak, Jio Financial Services’ long-term story remains intact for investors who can ride out the current headwinds and volatility.
