Jio Financial Services Limited (JFSL) is seeking shareholder approval for its unit to acquire equipment worth INR 36,000 crore from the retail arm of Reliance Industries as the financial services provider plans to enter the device leasing business, a postal ballot notice said.

Under the proposed deal, the JFSl unit called Jio Leasing Services will buy telecom equipment and devices that usually include routers and cell phones.

Jio Financial, spun out of Mukesh Ambani-led Reliance Group last year, had said in its earnings investor presentation that it will lease Jio Infocomm's AirFiber wifi services, phones, and laptops among other products.

Jio Leasing Services will rent out the equipment it buys to customers of Reliance Jio Infocomm, the financial services company further said. This company will compete in the device-rental market with the likes of Hewlett Packard and Lenovo.

Voting on proposed items in the notice ends on June 22. The deal is expected to go through in the financial years 2025 and 2026.

Jio Financial is majority-owned by public shareholders with a 52.88% stake, while promoters own the rest 47.12%.

The company added that under the provisions of the Foreign Exchange Management (Non Debt Instruments) Rules, 2019 (NDI Rules) and the foreign direct investment (FDI) policy of the government, foreign investment in a CIC is permitted under the government approval route.

In terms of the NDI Rules, the 49% investment limit requires shareholders’ approval by way of a special resolution. The cut-off date to determine shareholders who are eligible to vote on the proposal was fixed as May 17, a regulatory filing stated.

This comes after the board on 27 December approved foreign investments — including foreign portfolio investments — of up to 49%. As of 31 March, foreign investors held a 19.45% stake in the company. Core investment companies are non-banking financial companies (NBFCs) holding not less than 90% of their net assets in the form of investment in equity shares, preference shares, bonds, debentures, debt or loans in group companies.

The Reserve Bank of India (RBI) had, while granting its approval for change in the shareholding pattern of the company under the scheme for demerger from Reliance Industries Ltd, asked the company to meet eligibility criteria for a core investment company and apply for conversion to NBFC-CIC (non-banking financial company - core investment company). This, the RBI had said, must happen within six months of the date of the scheme becoming effective or three months of the date of listing of the equity shares, whichever is earlier.

The stock of Jio Financial Services on the BSE rose as much as 5.2% in intraday trade before settling at INR 367.85, 2.9% higher than the previous close.

Jio Financial Services made its stock market debut on 21 August 2023. For the quarter ended March, its net profit grew 6% sequentially to INR 311 crore. The company's consolidated net profit jumped manyfold, from INR 31 crore in the previous fiscal year to INR 1,605 crore in FY24.

Article Source – Reuters,