November 22, 2023
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Jio Wants To Go From NBFC to CIC: What It Means For Shareholders
Jio Financial Services, which was recently spun off from Reliance Industries, has applied to the Reserve Bank of India to transform from a non-banking financial company (NBFC) to a core investment company (CIC).
What is CIC?
CICs, guided by RBI principles, are entities primarily dedicated to investing their assets within their group companies. This could involve equity, preference shares, or convertible bonds. Unlike traditional financial institutions, CICs operate as passive holding companies, focusing on maintaining control over their group companies without actively participating in additional financial activities.
Conditions Governing CICs:
The transition to a CIC brings about specific conditions for Jio Financial Services: A minimum of 90% of its net assets must be invested in equity shares, preference shares, bonds, debentures or loans within its group companies.
Active trading in investments is restricted, allowing only block sales for purposes of dilution or disinvestment. Financial activities are confined to granting loans to group companies, issuing guarantees, and investing in designated financial instruments.
The shift to a CIC signals a strategic realignment for Jio Financial, ensuring conformity with regulatory obligations. Shareholders can anticipate a more focused approach to investment activities within the group, potentially enhancing the company’s control over its subsidiaries.
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