Corporate Communications

The Economic Times

NSE to conduct special pre-open session in RIL on July 20 amid Jio Financial demerger

The National Stock Exchange of India will conduct a special pre-open session for Reliance Industries (RIL) stock on July 20, on account of the demerger of the financial services business of the company.

RIL has fixed July 20 as the record date to determine eligible shareholders for the allotment of shares of the demerged entity. Under the demerger, shareholders of RIL will get 1 share of the demerged entity Reliance Strategic Investments for every 1 share held by them in the conglomerate ..

The demerged entity will be renamed Jio Financial Services and listed on the stock exchanges. The spun-off entity will be included in Nifty 50 and few other indices for a brief period until it gets officially listed on the stock exchanges, NSE said in a release.

This inclusion is in lieu with the change in the index methodology regulations laid out by the exchange while considering mergers and demergers in index constituents.

Inclusion Process

As per the new regulations, a demerged or spun-off entity of an index constituent will be included in the index at a constant price. The constant price is the difference between the demerged company’s closing price on T-1 day -- wherein T is ex-demerger date -- and the price derived during the special pre-open session.

On the T-1 day, after close of market hours, the exchange will create a dummy symbol, which will be added to the respective index. On the ‘T’ day, through a special pre-open session for price discovery a constant price will be derived for the spun-off entity. Therefore, Jio Financial Services will remain part of the Nifty 50 and other indices at a constant price till such time it officially gets listed on the exchanges.

Once the date for listing of shares is announced, the dummy symbol created will be replaced with an actual symbol, and JFS will form part of the index for a “temporary” period. Jio Financial will be removed from all the indices after the close of trading on the 3rd day of listing at the market determined price.

Why Temporary Inclusion?

Given RIL is the second largest stock by weightage in Nifty 50, a better price discovery and stability in prices are essential. It is for this reason that Jio Financial is being included in the index so as to give shareholders an opportunity to trade in the stock allotted to them and adjust their portfolio.

One must note that the methodology for inclusion and exclusion of stocks in indices are different for the exchange, and JFS too, needs to  ..

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