The Reserve Bank of India approved Jio Financial’s transition from an NBFC to a CIC in a filing on Thursday evening.
On Thursday, the Reserve Bank of India approved Jio Financial Services’ transformation from an NBFC to a CIC, as reported in a filing by the company.
Jio Financial applied for conversion to CIC as required by the banking regulator, alongside approval for changes in shareholding and control after demerging from Reliance Industries Limited (RIL). The company debuted on the stock exchanges on August 21, 2023.
Jio Financial Services: From NBFC to Core Investment Company
One of RBI’s conditions requires that the CIC invests at least 90 percent of its net assets in equity shares, preference shares, bonds, debentures, debt, or loans in group companies.
Transitioning from an NBFC to a CIC entails significant operational changes. As a Core Investment Company, Jio Financial Services will concentrate on investing in and managing its subsidiary companies. This shift would allow Jio Financial Services to enhance transparency in financials and operations across each subsidiary, facilitating improved investor value discovery.
A core investment company (CIC), as per RBI regulations, is a specialized Non-Banking Financial Company with assets of at least Rs 100 crore. In 2016, the RBI outlined CICs’ primary business goals, emphasizing their focus on acquiring securities and shares under specific regulatory conditions.
What changes for Jio Financial Services?
With this approval, Jio Financial Services gains increased operational flexibility, shifting focus to core investments over other financial activities. This allows Jio Financial to diversify its investment portfolio in response to dynamic market conditions.
Jio Financial Services: Journey so far
Jio Financial Services Ltd began its journey as Reliance Strategic Investments Private Limited on July 22, 1999, under the Companies Act of 1956. It subsequently changed its name to Reliance Strategic Investments Limited and received a new certificate of incorporation on January 14, 2002. On July 25, 2023, the company was renamed Jio Financial Services Limited, obtaining a new certificate of incorporation. A demerged entity of RIL, spanning energy-to-telecom, Jio Financial made its stock market debut on August 21, 2023.
In November of last year, Jio Financial Services applied to the RBI to convert from an NBFC to a Core Investment Company, disclosing this to the exchanges on November 21, 2023.
A Core Investment Company (CIC) is a specialized NBFC with assets exceeding ₹100 crore. According to the RBI circular dated December 20, 2016, the primary function of a CIC is acquiring shares and securities under specific conditions. A CIC is required to invest not less than 90% of its net assets in equity shares, preference shares, bonds, debentures, debt, or loans in group companies.
All CICs with assets exceeding ₹100 crore are regulated by RBI laws.
Jio Financial Services submitted its application to the RBI following the demerger of its financial services division from Reliance Industries, leading to its establishment.
In other developments, Reliance Industries, Jio Financial Services’ parent company, will announce its June quarter results on Friday, July 19.
On Thursday, shares of Jio Financial Services closed nearly unchanged at ₹348.2. The stock has appreciated by nearly 50% year-to-date in 2024.
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