Ambani’s finance unit makes tepid debut on passive fund selling

Shares of Jio Financial Services Ltd, a spun-off unit of Reliance Industries Ltd, fell in a widely-watched trading debut amid likely selling by passive-fund trackers.

Jio Financial’s stock dropped to Rs248.90 on Monday, after opening at Rs265 on the local BSE Ltd bourse. Shares were priced at Rs261.85 apiece through an hour-long special trading session last month, valuing the company at about $20 billion. Upon listing, Jio Financial will be part of a segment where buying and selling transactions have to be backed by the mandatory delivery of shares for 10 sessions.

Selling pressure on Jio Financial, which had been part of India’s key benchmark gauges, comes ahead of its likely exclusion from indexes, including the S&P BSE Sensex and NSE Nifty 50, after three days of trading. Nuvama Wealth Management analyst Abhilash Pagaria estimated selling of as much as $465 million by passive funds.

“There are ETFs and index funds who have had to sell shares, they have no choice as the stock will be removed from the index soon,” said Abhay Agarwal, a fund manager at Piper Serica Advisors Pvt, which also holds Reliance shares.

Despite the selling, analysts expect Jio Financial to benefit from Reliance’s wider presence in digital and retail businesses, potentially positioning it among India’s biggest non-banking finance companies and helping billionaire owner Mukesh Ambani create an empire similar to China’s Alibaba Group Holding Ltd and Tencent Holdings Ltd.

‘Late to party’

Reliance offered one share of Jio Financial for every share owned by the firm’s investors. The new company will unlock value for shareholders and give them an opportunity to be a part of a new growth platform, Ambani said in Reliance’s most recent annual report.

Jio Financial, which as yet boasts of little revenue but owns a 6.1 per cent stake in Reliance, has announced a partnership with BlackRock Inc. to set up an Indian asset management venture.

“We intend to be a full-service financial sector player and are already working on products,” K.V. Kamath, the non-executive chairman of Jio Financial, said during Monday’s listing ceremony in Mumbai. “There are some advantages of being little late to the party because you can take the advantage of riding on all the technological developments, which are already visible.”

Jio Financial has an asset-backed balance sheet, a strong credit rating and backing from its founders that will help it get access to funds at cheaper rates, especially after HDFC Bank Ltd merged with the country’s top mortgage lender earlier this year, Prakhar Sharma, a Mumbai-based analyst at Jefferies, wrote in a note.