Jio Financial Services will start trading on the BSE on August 21 post demerger.
In conversation with JST Investments’ Aditya Shah.
In conversation with JST Investments’ Aditya Shah.
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NewsTranscript
00:00 Hello and welcome to BQ Prime. A very good afternoon to all the viewers. I am Neeraj
00:06 Dhadia. A breaking news that we are picking up that has just come in a couple of minutes
00:10 ago is with regards to Geo Financial listing deal that has been announced and will be listed
00:15 on the 21st of August, which is Monday. In fact, this is an interesting point when FTSE
00:20 just removed Geo Financial Services, you know, and this was mainly on the back of no information
00:26 being received with regards to the listing date. On the back of this news, if you see
00:31 Reliance Industries itself, the stock has seen a spike. If you see, the day's low is
00:38 2180, from there it's hit a high of, sorry, that was the 52-week low, but today's low
00:44 was around 2508. From there it's gone to around 2577, 2563 as we speak. So, good up move,
00:51 a 1% up move and that could come in the support in terms of markets as well as we speak. Joining
00:57 us on the show to discuss more on the same is Aditya Shah, CIO at GST Investments. Aditya,
01:04 good afternoon and welcome to the show. Good afternoon, Neeraj. Thanks for having me. Always
01:10 a pleasure to speak to you. Aditya, the date with regards to where Geo Financial Services
01:15 was concerned was something which was much awaited by the markets as well. As we know,
01:20 the shares have already been allotted to the shareholders of Reliance Industries last week.
01:26 Your initial comments with regards to the listing date and what you hear? It is a procedural
01:34 process that has taken place, but the bigger important point that we need to consider is
01:38 a new baby out of Reliance is coming out and Reliance is now firmly getting into the financial
01:45 services industry, be it insurance, be it AMC, be it PurePlay and BFC. So, in my opinion,
01:52 I am very excited just as Geo disrupted the technology world, the mobility world. Now,
01:59 we need to see how the Geo Financial Services tries to disrupt many services across financial
02:06 services, be it insurance, be it AMC or be it the PurePlay lending per se also. So, very
02:14 excited. At this stage, the business is very, very small, but as the company takes steps
02:22 to expand its business, you will find it could become one of the top NBFCs, the spot that
02:28 has been left over by HDFC Limited. Right. With this, you know, this notification comes
02:35 a day after FTSE said that JFS will be removed from FTSE indices from the 22nd of August
02:40 because of no intimation of the listing date. And here you go, you hear of the listing date.
02:45 Does that anything, does that, you think that would change anything from its inclusion back
02:50 to FTSE? These are all very technical factors. Of course, the date for the listing was anyway
02:58 going to be intimated. So, I think it is a technical factor. And in my opinion, JFS could
03:06 be included in most of the indexes as Reliance puts its heavyweight behind the company and
03:12 the company starts to ramp up its business across most of the financial services. So,
03:17 I think that's a very short-term phenomenon. Longer term, it is a good candidate. As you
03:23 know, it is already a part of the index, of the Nifty index, and it could become part
03:27 of all the indexes. Right. Another aspect is for the benefit of the viewers, Aditya,
03:34 if you could explain, I mean, they've said that the script will be in trade-to-trade
03:39 settlement for 10 trading days. For the benefit of the viewers, what would this mean, if you
03:44 could explain that? Yes. So, whenever a new stock gets listed, in order to curb speculation
03:50 and in order to curb options trading on a stock, what really happens is the indexes
03:57 introduce them to a trade-to-trade settlement. What this really means is that you cannot
04:01 do any leverage trades on the stock, as well as you cannot do any options trade on the
04:06 stocks. For the first 10 days, in order to curb massive speculation, that really happens,
04:12 you will be only able to buy or sell the geo-financial stock with the cash that you have. No other
04:19 leverage positions will be allowed. This has been done in order to curb speculation. And
04:25 point number two is efficient price discovery. As the stock continues to trade, the exchanges
04:31 want efficient price discovery. So, this is a good mechanism that has been introduced
04:35 by the exchanges in order to safeguard the investor interest. Right. And then, in terms
04:44 of the dummy ticker, after the price discovery was fixed at 261.85 basis that the NBFC's
04:51 market capitalization totals to around 1.66 lakh odd crores. Now, this would actually
04:56 make it the second largest NBFC, I beg your pardon, in the country. How do you look at
05:03 it from a business perspective? Because, right now, immediately, it becomes number two.
05:11 So, basically, what is happening here is Reliance's firepower is fueling the market cap for this
05:17 company. As time really goes on, they will essentially be in three to four businesses,
05:22 which could be the whole bucket of lending. The second bucket could be insurance. They
05:26 have applied to the regulator for an insurance license. And we already know the third business
05:31 is they have tied up with BlackRock to set up an asset management or a mutual fund business.
05:37 So, these two to three businesses will be the ones which will be dominating the business.
05:42 And you know the firepower of Reliance. The distribution is one of their biggest advantages
05:46 that they have got. So, I feel there will be a massive scale up and there will be a
05:50 very quick scale up of the business from Jio. Right. So, if you have to look at a like to
05:57 like comparison, what would the peers look like? Because, as we are talking about the
06:03 various businesses, yes, there is interest in lending. We're talking about insurance,
06:08 payments, digital broking, asset management, merchant lending, a whole host of things.
06:15 And they've already announced a 50-50 JV with BlackRock to enter the mutual fund industry
06:20 as well. So, taking that into consideration, who would become a like to like peer according
06:25 to you? In NBFC, there is no like to like comparison. However, in banks, most top banks,
06:32 for example, an HDFC bank or an ICICI bank, which has got integrated insurance business
06:38 as well as an asset management business would be a direct comparison with Jio. However,
06:43 Jio's cost of fund will be higher as it will not be a bank, but it will come down as time
06:50 really goes on and it diversifies its business. It will be very interesting to see when they
06:55 set up their NBFC, it will be a deposit taking NBFC or it will be a non-deposit taking NBFC.
07:01 So, PRP, you can directly compare it with the likes of HDFC bank or a Kotak bank or
07:06 ICICI bank for that matter as well, but not with any NBFCs because it will be a far, far
07:12 bigger and a far, far diversified play as compared to any other NBFC, for example, like
07:16 a Bajaj Finance or a Chola Mandalam Finance or anything of that.
07:20 Right. So, another aspect was, you know, everyone expected that at the AGM is probably when
07:28 we would hear of the listing date, the roadmap, etc., which would be on the 28th of August.
07:36 And interestingly, what's happening is this time the AGM is in the afternoon and not in
07:40 the morning where usually it is. What, according to you, would be the key takeaways from the
07:45 AGM where there would be, you think there would be announcements with regards to roadmap
07:49 of future plans in the financial service industry?
07:52 Absolutely. There would be the future roadmap of Jio as well. We hear that a laptop is going
07:58 to get introduced in the AGM as well as on the future roadmap of how are they going to
08:05 start to start to get the insurance license as well as the AMC license. So, in my opinion,
08:12 this will be a landmark AGM again where Jio will signal to the financial services world
08:17 that it is coming to the world to disrupt it. And we will see very new products and
08:23 those new products as with Jio always will try to disrupt the entire orientation of the
08:29 industry. So, in my opinion, that is what will happen in the AGM and it is a very positive
08:35 step for the entire industry.
08:37 Right. And my last question coming to you Aditya is, yes, any holders of Reliance Industries
08:46 would have got a share of Jio Financial Services. What would you advise them to do post listing?
08:53 And the second part to it is someone who does not have or is not allotted a Jio Financial
08:58 Services share. Do you think it would be good to enter immediately on listing?
09:04 So, pure play, I would suggest anybody who has got the shares because of their holding
09:09 in Reliance. I would like to hold on to this talk because as I say, the music has just
09:18 started. The business will do exceptionally well over the next 10 to 15 years. I would
09:23 advise investors to be long term investors here per se and not a short term investor
09:27 because the market cap is already one and a half lakh crores. It would be very difficult
09:32 for investors to make a return in the short term. Point number one. Point number two,
09:36 anybody who is looking to enter the business, enter the Jio Financial Services stock, I
09:41 will suggest them to wait for a while. Let Jio Financial Services come and clear out
09:47 their businesses. Let them come out with their earnings presentation. And if there is a correction,
09:52 then only you should be entering because at one and a half to two lakh market cap, the
09:56 upside in the near term could be very limited. However, the upside in the longer term will
10:01 definitely be there. Right. Any clarity you have in terms of the
10:06 valuation side of it? Not really per se because you know, valuing
10:13 an insurer, valuing an AMC does not really mean that you value them on P. The valuation
10:18 metrics there are very, very different. And also, in terms of valuing a lender, that also
10:23 is very different. So once we have a consolidated earnings presentation or an earnings day with
10:29 the Jio management, then we will be able to figure out what would be the estimated valuation.
10:35 Right now at this stage, no clarity is there per se.
10:38 Right. So I think lots that is still, you know, not really, it's still kept undercover.
10:46 So a lot of things that will have to be uncovered as well. And probably the AGM will be the
10:51 right time where we will hear more as well as on the listing date as well. If the management
10:56 is going to speak, then they will be giving us more details and you know, what could be
11:00 expected overall from Jio Financial Services. Thank you Aditya so much for joining us on
11:05 the show and sharing the view. So that's with regards to Jio Financial Services. On the
11:09 back of which, if you see Relax Industries, which has seen a good move, I mean, almost
11:14 a little over 1% is the spike that we've seen as we speak. But if you see, because of its
11:20 impact with regards to Nifty 50 as well, you go clearly we did see a spike come in in terms
11:25 of Nifty 50 as well, but a slight cool off from the day's highest levels. We were just,
11:30 you know, in the green for a couple of minutes. And from there, we've come back into the negative
11:36 as well. That's all that we have on this session and all about Jio Financial Services that
11:41 will be listing on the 21st of August. We will give you more coverage throughout the
11:46 weekend and on Monday as well as to what could be expected out of it. That's all that we
11:51 have on this session. Thanks for watching and lots more lined up on the other side.
11:54 Please stay tuned to BQ Pride.
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