Reliance Industries Ltd (RIL) has announced its plans to demerge its financial services business, with a meeting of creditors and shareholders scheduled for May 2. RIL’s shareholders will receive one share in the new demerged entity for every share they hold.

The demerged entity named Jio Financial Services will be listed on the NSE and BSE after the demerger. The move is expected to create a big player in the NBFC space with a net worth of Rs 25,851 crore as of March 2022.

The demerger would allow the financial services entity to have a different strategy aligned to industry-specific risks, market dynamics, and growth trajectory. Financial services businesses can attract a different set of investors, strategic partners, lenders, and other stakeholders. It would have higher leverage and unlock value for Reliance Industries shareholders as a separate entity.

RIL’s financial services business consists of Reliance Retail Finance, Reliance Payment Solutions, Jio Information Aggregator Services, Reliance Retail Insurance Broking, and Reliance Industrial Investments and Holdings, the investment arm of RIL. The transfer of its investment in Jio Payments Bank will be under Reserve Bank of India regulations.

The demerger is expected to help RIL continue its growth and expansion in financial services with different growth optionality across businesses, including petrochem, E&P, telecom, retail, financial services, and new energy. This year’s AGM will likely focus on Jio Financial Services.

Over the past four months, RIL’s performance has been weaker than the market, with an 18% decrease compared to S&P BSE Sensex’s 8% decline. Despite this, JP Morgan analysts believe that RIL will continue outperforming the market in an environment of sluggish earnings. They see several possible catalysts leading to absolute outperformance over the next two years.

As of 12:50 pm on March 31, 2023, RIL shares have risen by 3.89% to Rs 2320.40 per share. This strong rally has brought the stock above its 20-day moving average, and positive divergence has been observed in key momentum oscillators such as the MACD and Slow Stochastic. In the short term, the stock is likely to trend with a positive bias.

If RIL’s shares fall, the immediate hurdle will likely be the 20-day moving average at Rs 2,285. If the stock falls below this level, the next significant support is Rs 2,250. However, if the stock continues to trade above Rs 2,285, it could trigger a rally towards Rs 2,340. The next target for the stock would then be Rs 2,400.