Indian retail investors borrowed 22.28 billion rupees ($234.06 million) to purchase shares in Jio Platforms on its stock market debut, making the company the country’s fourth-largest stock by margin-funded positions, as strong demand encouraged traders to take on additional risk.
Shares in the telecom and digital services company, owned by billionaire Mukesh Ambani, rose 26.7% on Wednesday, valuing it at approximately $137 billion and making it India’s second-largest listed company by market capitalisation.
The scale of borrowing on the first day of trading comes weeks after a wave of retail margin-call liquidations reduced the overall margin trading book in India’s cash market. The value of these positions stood at 1.51 trillion rupees on October 28, down from a record 1.59 trillion rupees on September 30.
Deven Choksey, managing director of DRChoksey Finserv, said the strong interest in Jio Platforms was expected given the company’s profile and market appeal.
“Naturally, (Jio Platforms) would draw interest from investors across the board. In that sense, it was bound to become eligible … sooner or later,” he said.
Margin trading facilities allow investors to borrow money from brokers, paying interest on the funds used to purchase shares. The exchange-approved arrangement enables traders to increase their market exposure without providing the full purchase price themselves.
Jio Platforms became eligible for margin funding from its first trading session after the National Stock Exchange of India classified it under Group 1 securities. The Bombay Stock Exchange assigned it to a similar Group A category.
As a result, the company quickly accumulated one of the largest margin trading positions in the country. Data from the two exchanges as of October 28 showed that only HDFC Bank, Jio Platforms’ parent company Reliance Industries, and BSE Ltd had larger margin trading facility positions.
Ashish Nanda, president and digital business head at Kotak Neo, said some investors believed that returns from Jio Platforms shares could exceed the cost of borrowing to purchase them. He pointed to the stock’s strong debut as a factor behind its rapid growth in the margin trading book.
Interest rates on margin trading in India typically range from 9% to 18% annually, making the potential return on an investment an important consideration for investors using borrowed funds.
Despite the headline figure of 22.28 billion rupees, the borrowing associated with Jio Platforms remains relatively small compared with the company’s overall market value. Dhiraj Relli, managing director and chief executive of HDFC Securities, said the margin-funded position represented just 0.17% of its total market capitalisation.
The strong debut therefore placed Jio Platforms among India’s largest margin-funded stocks while its borrowing exposure remained a small proportion of its market value.
