Jio Financial Services got approval from RBI to become a Core Investment Company
Reliance Jio’s subsidiary has turned into a Core Investment Company (CIC) after receiving approval from the Reserve Bank of India.
Jio Financial Services which is a demerged entity of the telecom conglomerate Reliance Industries Ltd (RIL), is now in operation.
In November 2023, Jio Financial Services applied RBI to convert its status from a NBFC to a Core Investment Company.
Jio Financial had sought the firm’s conversion to CIC as directed by the banking regulator. The banking regulator had directed the firm to undertake conversion after it approved the scheme of arrangement in terms of (i) shareholding and (ii) control of the company on the demerger of financial services business from Reliance Industries Limited (RIL).
Jio Financial: From NBFC to Core Investment Company
The company’s shares also jumped more than 1.5% on Friday during the open session, which caused the stock to be among the most actively traded on that day.
The NBFC’s transition to a CIC triggers various fundamental changes in the company’s operational fabric. As a Core Investment Company, Jio Financial Services will concentrate its activities on investments in subsidiary companies and management.
The CIC structure’s transition would give flexibility to Jio Financial Services to carve out the financials and operations of each of its subsidiaries, thereby enabling better price discovery by investors.
Unlike regular NBFCs, CICs are non-deposit taking financial companies that hold not less than 90% of their net assets in the form of investments in equity shares, preference shares, bonds, debentures and debt or loans in group companies.
The company becomes a CIC to ensure more operational flexibility. It wants to concentrate only on the core investment activities and does not want to get involved in other Financial Services.
Taken as case studies, IT companies represent a huge potential and awareness can be raised among them about the advantages of diversifying portfolios. They have the flexibility to adjust to the market trend as it changes from time to time.
