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India’s Reliance Industries Limited (RIL), the country’s most valuable company, has initiated the demerger process of its financial services business.
On May 2, 2023, a meeting of the creditors and shareholders of Reliance Industries will be held to consider and approve the proposed scheme of arrangement between RIL and Reliance Strategic Investments (RSIL).
After the demerger, the name of Reliance Strategic Investments will be changed to Jio Financial Services Limited.
Last year, Reliance Industries, led by Mukesh Ambani, had announced the demerger of its financial services business into a separate entity and subsequent listing on the stock exchanges.
The demerger will be carried out via a share-swap arrangement, and RIL shareholders will receive one share of Jio Financial Services for every share held by them.
As of March 31, 2022, the financial services business’s turnover was Rs 1,387 crore, and KV Kamath would be the non-executive chairman of the new company.
Jio Financial Services plans to launch a consumer and merchant lending business to complement and supplement traditional credit bureau-based underwriting.
Reliance’s financial services business has investments in Reliance Industrial Investments and Holdings Limited, Reliance Payment Solutions Limited, Jio Payments Bank Limited, Reliance Retail Finance Limited, Jio Information Aggregator Services Limited, and Reliance Retail Insurance Broking Limited.
RIL had previously stated that the spinning off of its financial services business into a separate entity is due to the need for a differentiated strategy aligned with industry-specific risks, market dynamics, and growth trajectory.
It is capable of attracting a different set of investors, strategic partners, lenders, and other stakeholders, and the nature and competition involved in the financial services business is distinct from the other businesses.
According to RIL, the creation of an independent company focusing exclusively on financial services can help attract different sets of investors, strategic partners, lenders, and other stakeholders having a specific interest in the financial services business.
A financial services company can also have higher leverage for its growth, compared to the demerged company. The demerger undertaking can also unlock value for the shareholders of the demerged company.