Jio Financial Requests RBI Approval to Transition from NBFC to Core Investment Company

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Three points you will get to know in this article:

  • JFS is a fintech subsidiary of Reliance Industries that has applied to become a CIC after demerging from its parent company.
  • JFS has posted strong Q2 FY24 results with a diversified portfolio of fintech offerings, including insurance, retail payments, digital lending, and wealth management.
  • JFS aims to tap into the $2.1 Tn domestic fintech market with a D2C approach and plans to expand its presence in rural and semi-urban areas.

Jio Financial Services (JFS), recently separated from Reliance Industries Ltd (RIL), has formally approached the Reserve Bank of India (RBI) to undergo a transformation from a non-banking financial company (NBFC) to a core investment company (CIC), as mandated by regulatory requirements.

The Rationale Behind the Shift

Having successfully debuted on the stock exchanges in August after its demerger from RIL in July, JFS has quickly established itself as a formidable player in the fintech landscape. This dynamic financial entity is now a key contender in various sectors, such as payments, insurance, and asset management, presenting substantial competition to fintech startups.

In a filing made on Tuesday (November 21), the company revealed its application to the RBI, signaling its intent to shift from an NBFC to a CIC. This strategic move is in line with adjusting its shareholding structure and control, a necessary step post the demerger from Reliance Industries, aligning with the stipulations set forth by the RBI.

The Difference Between NBFC and CIC

As per the guidelines laid out by the Reserve Bank of India (RBI), Core Investment Companies (CICs) are primarily involved in investing in their group entities through various financial instruments like equity, preference shares, convertibles, or loans. These companies function as passive holding entities, primarily focused on maintaining control over their group companies, refraining from participating in other financial activities.

JFS Denies Fundraising Plans

Contrary to reports circulating in the media, Jio Financial Services has dismissed claims of seeking funds through bond issuance. The company has explicitly contradicted a Reuters report suggesting a potential fundraising of up to INR 10,000 Crores.

In response to these reports, the company has emphasized its commitment to adhering to disclosure obligations outlined in the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as well as its agreements with stock exchanges. The clarification aims to assure stakeholders and the public of Jio Financial Services’ compliance with regulatory standards and transparency in its financial dealings.

JFS Expands its Portfolio and Profitability

Earlier in the year, Jio Financial Services (JFS) joined forces with BlackRock, the world’s largest asset management company, to make its mark in India’s mutual fund market.

In a recent announcement, JFS shared the exciting news that the Reserve Bank of India (RBI) has given the green light to the appointments of Isha Ambani, Anshuman Thakur, and Hitesh Kumar Sethia as directors of the company.

Adding to their innovative lineup, the company introduced a cutting-edge soundbox, alongside a diverse array of offerings ranging from personal and merchant lending to insurance and retail payments.

In the dynamic fintech arena, JFS stands shoulder to shoulder with industry giants such as Paytm, PhonePe, BharatPe, PB Fintech, InsuranceDekho, CRED, Zerodha, and Groww, showcasing its prowess and competitive edge.

In the second quarter of the fiscal year 2024, the company experienced a noteworthy twofold increase in its consolidated profit after tax (PAT), amounting to INR 668.2 Cr. Additionally, there was a substantial surge of over 61% in operating revenue on a quarter-on-quarter basis, reaching INR 608 Cr.

The Outlook for the Fintech Market

Looking ahead, our insightful analysis foresees a robust trajectory for the domestic fintech market, estimating its growth to hit a substantial $2.1 trillion by the year 2030, boasting a projected Compound Annual Growth Rate (CAGR) of 18% starting from 2022. Within this expansive landscape, lending technology is expected to take center stage, contributing significantly with a valuation of $1.3 trillion.

JFS is strategically positioning itself in the fintech realm, aiming to unravel the intricacies of the industry through a direct-to-consumer (D2C) approach. This entails a strong focus on enhancing cost efficiencies and fostering personalized customer interactions, charting a distinctive path in the dynamic fintech landscape.

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