Jio Financial gets RBI nod to become core investment company; shares up over 2%

Jio Financial Services, the demerged NBFC arm of Reliance Industries Ltd (RIL), applied to the RBI in November 2023 to become a CIC. The company had applied for the conversion to a CIC as mandated by the banking regulator. RBI required this conversion while approving changes in Jio Financial Services’ shareholding pattern and control following the demerger of its financial services business from RIL.

Acting as a holding company, a CIC is primarily responsible for overseeing the shares and securities of the companies in its group. With the RBI approval, Jio Financial Services will be able to consolidate its several business verticals, which include lending, asset management, insurance, and other areas, into separate companies that fall under the purview of CIC.

On August 21, 2023, Jio Financial Services officially made its debut on the stock exchanges.

According to regulatory definitions, a CIC must hold at least 90% of its net assets in investments including bonds, debentures, equity shares, preference shares and loans to group companies, and its asset size cannot be less than ₹100 crore. Because of this structure, capital can be deployed among subsidiaries in an efficient manner, guaranteeing that every vertical gets the resources it needs to flourish.

Jio Financial Services will be able to define the activities and financials of each subsidiary with the adoption of a CIC structure, which would improve value discovery for investors. This apart, the CIC model offers a more simplified and compliant operational structure by better aligning with regulatory frameworks. Jio Financial Services may concentrate on effectively allocating funds to its subsidiaries now that it is a CIC.

The stock opened higher at ₹354.5 apiece on the NSE and rallied as much as 2.39% to hit an intraday high of ₹356.04 apiece. However, the stock pared early gains and traded 0.99% higher at ₹351 apiece on the NSE at 1:00 pm.