India's Jio Financial continues slide, likely delaying index removal

BENGALURU, Aug 22 (Reuters) - Shares in Indias Jio Financial Services (JFS) (JIOF.NS) slid the maximum allowed 5% for a second straight day on Tuesday, which will likely delay their exclusion from the countrys benchmark indexes.

JFS shares opened down 5% at 236.45 rupees and stayed at that price. They ended 5% lower on Monday in their trading debut as funds continued to trim their holding, accumulated after JFS was spun out of billionaire Mukesh Ambanis Reliance Industries (RELI.NS).

Since Reliance is part of the benchmark Nifty 50 (.NSEI) and Sensex (.BSESN) indexes, JFS was automatically included, with the plan to remove them at the end of the third trading day -- which had led to the heavy sell-off in the stock since their debut.

However, the stock exchange regulators had said JFSs removal from the indexes on Aug. 23 would be delayed if the stock hit the 5% upper or lower circuits for two days in a row.

The removal could be postponed by three days if the stock continues to trade at the lower circuit, said Abhilash Pagaria, Head, Nuvama Alternative & Quantitative Research.

JFSs roughly 10% drop in the past two days has reduced its valuation to about $18 billion, from around $20 billion during a so-called \“price discovery\” session in mid July.

Reliances shares have fallen about 1% in the past two sessions. JFS, which has said it intends to be a \“full-service financial services player\”, holds a 6.1% stake in Reliance.

Analysts have said investors will look for more clarity on the scope of JFSs business at Reliances annual general meeting on Aug. 28.

\“In the near term, JFS is unlikely to impinge on the terrain of banks. Initially, it could disrupt the digital and unsecured lending market done by fintechs and NBFCs,\” Macquarie analysts said in a note.

\“Banks have a significant edge on the cost of funds and have built robust collection mechanisms, especially in the secured lending market which is far more difficult to scale up.\”

($1 = 83.0750 Indian rupees)