Jio Financial Services is soon to become a Core Investment Company (CIC) from a Non-Banking Financial Company (NBFC). The move comes in response to a directive from the Reserve Bank of India (RBI), which mandated the conversion from a NBFC structure to that of a holding company.
In this podcast hosted by Anjana PV, Senior Assistant Editor Hamsini Karthik, shares her insights into the concept of a Core Investment Company, emphasising its role as a holding entity with the primary function of holding various subsidiaries. This structure allows the CIC to efficiently deploy capital to its subsidiaries as needed. The shift for Jio Financial Services involves demerging its diverse verticals -- lending, asset management, insurance, among others -- into separate entities.
The decision to convert to a CIC stems from the dissonance between Jio Financial Services’ current balance sheet and the typical structure of an NBFC as it lacks the assets and business structure associated with NBFCs. Additionally, its various subsidiaries perform a variety of functions, from payroll, insurance, asset management, to lending, and this does not align with the categories defined for pure-play NBFCs.
Hamsini Kartik highlighted that the conversion to a CIC structure could bring more transparency to Jio Financial Services’ business model and help enable true value discovery. The company’s current valuation has faced challenges due to its unconventional structure, leading to a holding company discount. The move to this model is expected to address this issue, allowing for a more accurate reflection of the value of each subsidiary.
The podcast emphasised that while the long-term impact remains uncertain, this move represents a pivotal moment for investors to witness the genuine value of Jio Financial Services’ diverse ventures.