Jio Financial Services (JFS), the financial arm of Reliance Industries (RIL), has submitted an application to the Reserve Bank of India (RBI) for the conversion of the firm to a Core Investment Company (CIC) from a Non-Banking Financial Company (NBFC). A CIC is an NBFC which carries on the business of acquisition of shares and securities, holding not less than 90% of net assets in the form of investment in group companies.
As per the RBI norms, it is mandatory for JFS to undertake the conversion exercise while changing the shareholding pattern and control of the company following the demerger from parent, RIL. Last week, the Reserve Bank of India (RBI) approved the appointment of Isha Ambani, Anshuman Thakur and Hitesh Kumar as the company's directors.
“This is to inform that as mandated by the Reserve Bank of India (while granting its approval for change in the shareholding pattern and control of the Company pursuant to the demerger of the Financial Services Business from Reliance Industries Limited into the Company), the Company has submitted the application for conversion of the Company from NBFC to CIC,” JFS says in an exchange filing.
Reacting to the news, shares of Jio Financial rose as much as 0.7% to ₹221.75 on the BSE, while the market capitalisation climbed to ₹1.4 lakh crore. Early today, the NBFC stock opened marginally lower at 219.55, against the previous closing price of ₹220.25 on the BSE.
The Reliance group stock had gained over 2% in the previous session amid a report that billionaire Mukesh Ambani-led firm looked to raise between ₹5,000 crore to ₹10,000 crore through its maiden bond issue, which was later refuted by the company.
The exchange has sought clarification from the company in this regard. In its clarification of the BSE, JFS says, “Currently, the company has no plans to raise money by way of bond issuance or otherwise. The news item is speculative.”
The NBFC stock, the third largest in terms of market capitalisation after Bajaj Finance and its holding company Bajaj Finserv, hit an all-time high of ₹278.20 on August 21, 2023, while it touched its record low of ₹205.15 on August 25, 2023.
Jio Financial shares have witnessed tepid performance since its listing on the exchanges in August this year. In the initial days, the stock was under tress amid sell-off by passive funds, who adjusted their portfolios from the removal of the stock from Sensex and Nifty. JFS shares officially debuted on the stock exchanges on August 21, after spending a month as a dummy stock following demerger from the parent. The stock was listed at ₹262 on the NSE and ₹265 on the BSE against its discovered price of ₹261.85 fixed at a special pre-open session conducted by the NSE on July 20.
However, JFSL shares gained buying momentum after Mukesh Ambani, chairman and managing director of RIL, announced that the company will soon enter India’s insurance segment. In the 46th AGM of RIL conducted on August 28, Ambani said, “JFSL will enter the insurance segment to offer simple, yet smart, Life, General, and Health insurance products through a seamless digital interface, potentially partnering with global players. It will use predictive data analytics to co-create contextual products with partners and cater to customer requirements in a truly unique way.”
Ambani said Jio Financial will consolidate the payments infrastructure to further drive digital payments adoption in India. “JFSL products will not just compete with current industry benchmarks but also explore path-breaking features such as blockchain-based platforms and CBDC. They will adhere to the highest standards of security, and regulatory norms and ensure protection of customer transaction data at all times.”
Last month, the company released its first quarterly results post listing on stock exchanges, which showed that its net profit more than doubled sequentially. The non-banking financial services (NBFC) arm of RIL posted a profit of ₹668.18 crore in the September quarter of the current fiscal (Q2 FY24), up 101.3% from ₹331.92 crore in the June quarter of FY24. Total revenue from operations of the financial services firm jumped 48% on a sequential basis to ₹608 crore, aided by dividend income of ₹217 crore.
As per the company, total expenses increased sequentially by 32.7% to ₹71.43 crore as against ₹53.81 crore in the previous quarter.
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