Jio Financial Services announced on Thursday that it has received approval from the Reserve Bank of India (RBI) for its transition from a Non-Banking Financial Company (NBFC) to a Core Investment Company (CIC), as per a disclosure made on November 21, 2023.
According to RBI guidelines, a CIC is a specialized NBFC with a minimum asset size of Rs 100 crore. The central bank’s circular dated December 20, 2016 outlines that a CIC’s primary business revolves around the acquisition of shares and securities under certain conditions.
Key among these conditions is that a CIC must hold at least 90 percent of its net assets in the form of investments in equity shares, preference shares, bonds, debentures, debt, or loans in its group companies.
The transition to a CIC entails significant operational changes for Jio Financial Services. As a CIC, the company will focus primarily on investing in and managing its subsidiary companies. This strategic shift aims to enhance financial transparency and operational efficiency across its subsidiaries, facilitating better value discovery for investors.
Unlike traditional NBFCs, CICs do not accept deposits and predominantly invest their assets in equity shares, preference shares, or debt instruments of their group entities. This transformation grants Jio Financial Services greater operational flexibility, enabling it to concentrate exclusively on core investment activities without offering other financial services.
Moreover, as a CIC, Jio Financial Services can diversify its investment portfolio across different sectors, thereby adapting more effectively to evolving market dynamics and optimizing returns for its stakeholders.
Following the announcement, Jio Financial Services’ shares surged by more than 1.5 percent during the opening session on Friday, settling at Rs 353.25 at the time of this report.
The transition to a CIC marks a strategic evolution for Jio Financial Services, aligning its operational model with regulatory requirements while positioning itself for sustained growth and value creation in the financial markets.