Jio Financial Services gets RBI nod to become Core Investment Company, may unlock value at business units

Earlier, in November 2023, Reliance Industries’ financial services arm Jio Financial had applied to become a Core Investment Company.

Jio Financial Services has secured Reserve Bank of India’s approval to convert into a core investment company (CIC) from a non-bank financial company, it said in a stock exchange filing.

In November, Jio Financial, the financial services arm of Reliance Industries Ltd (RIL), applied to become a CIC after the banking regulator directed the conversion following its demerger from RIL and a change in its shareholding pattern.

A CIC acts as a holding entity, primarily managing the shares and securities of its group companies. With the transition, Jio Financial Services could streamline its diverse business verticals—spanning lending, asset management, insurance, and more—into distinct entities under the CIC umbrella.

Also Read: Reliance Jio IPO may get over Rs 9 lakh crore valuation, says Jefferies

Unlike traditional NBFCs, which engage in various financial activities, Jio Financial Services’ subsidiaries perform various functions, from payroll and insurance to asset management and lending. This diversity does not align with the categories defined for pure-play NBFCs.

A CIC, by regulatory definition, must have an asset size greater than Rs 100 crore and must hold at least 90 percent of its net assets in investments such as equity shares, preference shares, bonds, debentures, or loans in group companies. This structure allows for efficient capital deployment across subsidiaries, ensuring each vertical receives the necessary resources for growth.

The transformation to a CIC structure would enable Jio Financial Services to delineate the financials and operations of each subsidiary, enabling better value discovery for investors. Moreover, the CIC model aligns better with regulatory frameworks, providing a more compliant and streamlined operational structure. As a CIC, Jio Financial Services can focus on efficiently allocating capital to its subsidiaries.

Jio Financial Services was listed on stock exchanges in August 2023 under the price discovery method after RIL spun off its financial services business arm.

Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.