Customers Bancorp Inc., a US banking services firm which is backed and led by Jay Sidhu, a US-based banker of Indian origin, is investing $51 million (Rs 310 crore) to pick around 5.9 per cent stake in Religare Enterprises Ltd. The transaction is split into a combination of primary issue of shares of the public listed firm besides stake purchase from promoters of Religare, as per a statement issued on Wednesday.
As per the deal, NASDAQ-listed Customers Bancorp shall make a secondary purchase of shares worth $22 million of Religare from the promoters Malvinder and Shivinder Singh. The promoters are selling the shares as part of their 22 per cent stake divestment to bring down their shareholding to 49 per cent to qualify Religare Enterprises to set up an NOFHC as per RBI guidelines to apply for a banking licence. The transaction would be done at prevailing market price on the date of purchase.
Concurrently, Customers Bancorp shall also make a fresh investment of $28 million in share warrants issued by Religare on a preferential allotment basis. The warrants would be convertible into equity shares within 18 months. It will also subscribe to common equity shares of Religare equivalent to $1 million.
Religare Enterprises’ scrip rose 5.63 per cent to close at Rs 339.7 on the BSE in a weak Mumbai market on Wednesday. The announcement of the deal came after trading stopped for the day.
The company did not disclose the quantum of stake that Customers Bancorp will be picking. At the current market price, Customers Bancorp could be picking around 5.9 per cent stake in Religare Enterprises assuming full conversion of warrants into equity, as per VCCircle estimates.
Religare and Customers Bancorp management teams will also enter into a business alliance agreement to find opportunities to service Religare’s customers across businesses, as well as potential customers of Customers Bancorp of Indian origin in the US for their India investment needs.
Sunil Godhwani, chairman and managing director, Religare Enterprises, said, “CUBI management team’s expertise in global banking will be extremely supportive in our banking foray. We are confident that the proposed association will further strengthen REL’s endeavour to create a distinctive and diversified financial services conglomerate that believes in the Indian market’s long-term growth potential.”
Sidhu, who is the chairman and CEO, Customers Bancorp Inc., said, “We think there are mutually beneficial opportunities for both organisations to explore. Going forward, our management team’s extensive banking experience will be available to Religare in its banking foray.”
He said Customers Bancorp agreed to invest in Religare after doing research on investment opportunities in the financial services industry in India with the help of Dinodia Capital Advisors.
For Sidhu, who led the rise of Sovereign Bancorp into one of the largest US regional banks before being ousted from the organisation, this would be the second attempt to enter Indian financial services business. Two years ago Customers Bancorp was among the investors who proposed to invest in Dhanlaxmi Bank.
However, the deal failed and the Thrissur-based private bank disclosed that Customers Bancorp will not be able to participate in funding because of “certain regulatory reasons applicable in the jurisdiction of its incorporation.” Later the chief executive of Dhanlaxmi Bank quit over differences with the bank’s board.
(Edited by Joby Puthuparampil Johnson)