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What will be the Net Worth of JFSL in FY23?

Reliance Industries Ltd’s (RIL) press release (link) gives a formula for determination of cost of acquisition of equity shares of the company (RIL) and Reliance Strategic Investments Ltd (RSIL), which will be renamed as Jio Financial Services Ltd (JFSL). The formula states apportion of de-merger cost of acquisition of equity shares of the RIL in the ratio of 4.68 for RSIL and 95.32 for RIL. Income Tax provisions states that the Cost of Acquisition in case of demerger will be net worth of the Resulting Company (RSIL) divided by the net worth of the Demerged Company (RIL). Thus, we use the standalone networth of RIL of Rs5 tn and apportionment ratio of 4.68% of RSIL to arrive at networth of RSIL of ~Rs 235bn. Please note, that the effective date of scheme is July 1, 2023, so this ratio will be calculated on the standalone BS as on 30th June’2023. Since, RIL has not reported its Q1FY24 results yet, we have based our calculation on net worth as on 31st March’2023. The resulting company had a net worth of ~Rs 279.6bn as on FY22.

As part of the scheme, RIL will transfer its investment in Reliance Industrial Investments and Holdings Ltd (RIIHL) to JFSL. RIIHL is the ultimate beneficiary of 6.1% RIL shares. Over past few months, investors had questions on whether the 6.1% treasury shares in RIL will be transferred at Book Value or Market Value. The net worth of ~Rs 235bn, suggests that the transfer will be at the Book Value. In the special price discovery session held today, the price of JFSL has been discovered at Rs 262.

Exhibit 1: Net Worth of Jio Financial Services as on FY23

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