RIL shareholders to meet on May 2 on demerger of financial services biz

Demerger expected to create a behemoth in financial services space.

Abhijit Lele reports.

Lenders and shareholders of Reliance Industries Ltd (RIL) will meet on May 2 to demerge the firm’s financial services business.

This is expected to create a big player in segments including the NBFC (non-banking financial company) space with net worth of Rs 25,851 crore as of March 2022.

According to the plan, RIL shareholders will get a share in the demerged entity for each one held in the company.

After demerger, the shares of Reliance Strategic Investments will be named Jio Financial Services, and will be listed on the National Stock Exchange and the BSE, the company said in a statement.

The meeting is being held following an order by the National Company Law Tribunal, Mumbai Bench.

Elaborating on the rationale for the demerger, the company said financial services were among the multiple businesses carried out by the conglomerate.

Further growth and expansion in financial services would require a differentiated strategy aligned to the industry-specific risks, market dynamics, and growth trajectory.

The nature of financial services is distinct from other businesses and they are capable of attracting a different set of investors, strategic partners, lenders and other stakeholders, it said.

Dwelling on benefits from demerger, it said this would lead to an independent company focusing exclusively on financial services and exploring opportunities in the sector.

A financial services company can have higher leverage for growth and would unlock the value for shareholders of the demerged company.

With emphasis on financial inclusion, the government, as well as regulators, has been developing policies for services including banking, NBFCs, insurance, mutual funds, etc.

According to rating agency ICRA, NBFCs and housing finance companies (HFCs) have embarked on a high growth trajectory compared to the trend in FY2020-22.

Against this backdrop, access to timely and commensurate funding becomes the key, considering the tightening systemic liquidity and current inflationary conditions.

The loan books of retail, NBFCs and HFCs are estimated to grow 13-15 per cent in FY23.

They are expected to touch Rs 30 trillion by March 2024 compared to Rs 23 trillion in March 2022, it added.

Growth could be in the range of 12-14 per cent in FY2024 compared to the average of 8.5 per cent seen during the previous three financial years.