Jio Financial Services Stock Hit 5% Lower Circuit For 2nd Day In Row, Falls By 10% Since Listing; Why?

Listing went red! Jio Financial Services' market debut was one of the most-awaited listings, however, this NBFC stock could not find any support from bulls since August 21. On Tuesday, the stock locked at yet another 5% lower circuit, which indicated that there were many sellers but no buyers. In 2 days, Jio Financial Services stock has tumbled by nearly 10%. The company is the third largest NBCF after Bajaj Group-backed Bajaj Finance and Bajaj Finserv. It is being said that selling is mainly driven by institutional investors, and bears are likely to continue in Jio Financial shares in the near term.

On Tuesday, at the time of writing, Jio Financial Services share price traded at 5% lower circuit to Rs 239.20 apiece. At the current price level, the stock's market cap was at Rs 1,51,970.56 crore, down by Rs 7,973.37 crore from the previous session's m-cap of Rs 1,59,943.93 crore.

At the opening bell, there were no buyers in Jio Financial Services, but more than 555.48 lakh shares were dumped.

Jio Financial Services listed on August 21 at Rs 265 apiece, up by 1.20% from its fixed price of Rs 261.85 apiece in the price discovery session which was held last month. However, the stock ended at a 5% lower circuit to Rs 251.75 apiece on BSE.

RIL demerged its financial services business into JFSL to focus on digital delivery of financial products to democratize financial services access for 1.4 billion Indians. JFSL to launch consumer and merchant lending business based on proprietary data analytics to complement and supplement the traditional credit bureau-based underwriting. JFS will continue to evaluate organic growth, joint-venture partnerships as well as inorganic opportunities in insurance, asset management and digital broking segments.

It is being known that Reliance Industries approved for listing of 6.53 billion shares of Jio Financial Services.

Explaining the selling in Jio Financial Services, Dr V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said, "Since the stock is in the T segment institutional selling is dragging the price down."

Vijayakumar expects selling to continue in the near term. He said, "JFSL's valuation is based on expectations surrounding its future growth potential and its 6.1% stake that it owns in RIL. The future growth prospects of JFSL are indeed bright since it can scale up its business hugely with its enormous connection with consumers and merchants. But institutional selling is a drag on the share price in the near-term."

In the annual report FY23, RIL's chief Mukesh Ambani said, "Jio Financial Services Limited along with its subsidiaries will leverage the technological capabilities of Reliance and digitally deliver financial services, democratising access to financial services offerings for Indian citizens. Jio Financial Services aims to provide simple, affordable and innovative digital-first solutions."

Ambani added, "Jio Financial Services Limited is positioned uniquely to capture the growth opportunities in the financial services sector and play a crucial role in transforming the landscape of digital finance in India."

In its insurance sector research note dated August 21, CLSA said, "A media report indicates Jio Financial Services (Jio) plans to enter life and general insurance manufacturing and has set aside Rs10bn in capital for each business. Insurance manufacturing (+55 players in India) is a specialised and regulated business with each product having its own unique lifecycle/differing model. It will be interesting to see the impact Jio can make on pricing in the industry while we believe covering more lives could be a key focus area for Jio. Insurance distribution may present an opportunity as it remains a fragmented segment with the presence of few large players only (like banks, NBFCs, PB Fintech etc.). Jio already has a broking business in place with over 17 insurance partners and thus this may be scaled up faster, in our view."

Last month, Jio Financial Services and BlackRock announced an agreement to form Jio BlackRock, a 50:50 joint venture that combines the respective strengths and trusted brands of BlackRock and JFS to deliver tech-enabled access to affordable, innovative investment solutions for millions of investors in India. JFS and BlackRock are targeting an initial investment of $150 million each in the joint venture. Also, the joint venture will launch operations post-receipt of regulatory and statutory approvals. The company will have its own management team.

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