Jio Financial Seeks RBI Approval to Convert from NBFC to CIC

Jio Financial Services, the recently demerged entity of Reliance Industries has taken a step by applying to the Reserve Bank of India (RBI) for a conversion from a non-banking financial company (NBFC) to a core investment company (CIC), in accordance with regulatory requirements.

As per the exchange filing on November 21, the company announced, it submitted an application to convert from NBFC to CIC. This move aligns with the RBI mandate and is part of the broader restructuring following the demerger from Reliance Industries. The application aims to facilitate changes in the company's shareholding pattern and control, adhering to regulatory guidelines.

Core Investment Company (CIC)

As per RBI guidelines, a Core Investment Company is a type of entity whose primary assets consist of investments in its group companies. These investments can take the form of equity, preference shares, convertible bonds, or loans. CICs are essentially passive holding companies designed to maintain control over their group entities and are restricted from engaging in various financial activities.

Regulatory Conditions for CICs

The RBI sets specific conditions for companies seeking CIC status. CIC must hold at least 90 percent of its net assets in the form of investments in equity shares, preference shares, bonds, debentures, or loans in group companies. Additionally, it is restricted from trading its investments except through block sales for purposes like dilution or disinvestment. CICs are also limited to activities such as granting loans to group companies, issuing guarantees on behalf of group entities, and investing in bank deposits, money market instruments, government securities, as well as bonds or debentures issued by group companies.

Clarification on Bond Issuance Reports

Addressing recent reports suggesting Jio Financial Services' intention to raise funds through bond issuance, the company has refuted these claims. As per the reports, indicated a potential bond issuance of up to ₹10,000 crore, in the March quarter, pending regulatory approvals. However, Jio Financial Services has clarified that it is not currently pursuing a bond issuance.

By seeking CIC status, Jio Financial Services aims to optimize its financial structure in line with regulatory guidelines, emphasizing a strategic focus on maintaining control over its group companies through strategic investments.

Jio Finaicial Q2 Result

Jio Financial Services, which recently got listed on the stock exchange in August, in its first quarterly results covering July to September, reported a net profit of ₹668 crore, increased 101% from the previous quarter.

As a non-banking financial company (NBFC) separated from Reliance Industries, Jio Financial Services reported a total income of ₹608 crore for the quarter. The interest income for the lender was ₹186 crore, a bit lower than the ₹202 crore recorded in the April-June FY24 quarter.

Stock Performance

Jio Financial Services made its debut on the stock market on August 21, 2023, with an initial trading price of approximately ₹262. However, shortly after its listing, the stock declined sharply, reaching a low of ₹202 on October 24, 2023. After touching a low of ₹202, the stock price swiftly surged to a high of ₹266 within just seven trading days.

Following this upward swing, a round of profit-taking occurred, leading to another dip, and the stock reached a low of ₹204 in October 2023. Currently, the stock is moving within a certain price range, trading around ₹220. This represents a 17% decrease from its highest point of ₹266.