Jio Financial Services Ltd (JFSL) announced on Thursday that its board has approved a major investment deal with NB Holdings Corporation, a wholly-owned subsidiary of Bank of America Corporation. The agreement involves an investment of up to ₹18,268.22 crore in Jio Credit Ltd, a move that will grant NB Holdings a significant 49.90% stake.
The news sent Jio Financial Services shares soaring, with the stock initially gaining 3.27% to reach a high of ₹263.35 on the BSE before settling at ₹258.45, up 1.35% for the day.
Details of the Strategic Investment
The investment by NB Holdings Corporation will be executed through a share subscription agreement and a shareholders' agreement. This strategic funding will be channeled into Jio Credit Ltd via a preferential issue on a private placement basis, pending all necessary statutory and regulatory approvals.
The comprehensive deal is structured to include two main components:
- Equity Shares: Up to 4,29,29,760 equity shares, each with a face value of ₹10, will be issued for a cash consideration of up to ₹6,612.90 crore. These shares will represent 26.50% of Jio Credit Ltd's post-issue paid-up equity share capital.
- Warrants: Additionally, up to 7,56,64,248 warrants will be issued for a cash consideration of up to ₹11,655.32 crore. Each warrant is convertible into one fully paid-up equity share of Jio Credit Ltd within 18 months from the date of allotment.
Under the terms, 25% of the consideration for the warrants will be paid upfront at the time of subscription, with the remaining balance due upon their conversion. Once all warrants are converted, NB Holdings, USA, will hold 49.90% of the paid-up equity capital of Jio Credit Ltd.
Market Reaction and Future Outlook
The board's approval and the substantial investment underscore confidence in Jio Credit's potential and Jio Financial Services' broader strategy. JFSL has confirmed that this transaction is not a related party transaction, and none of its promoter, promoter group, or group companies have any interest in it, ensuring transparency and adherence to corporate governance standards.
This significant capital infusion is expected to bolster Jio Credit Ltd's operations and expansion plans, positioning it for growth in the financial services sector. Investors will be closely watching the regulatory approval process and the subsequent integration of this partnership.