Religare Enterprises Ltd (REL), a financial services holding company with operating subsidiaries across various verticals, reported a Rs 90 crore loss in its consolidated results for the first quarter ended June 30, 2013, compared with a profit after tax of Rs 24 crore in the same quarter last year.
The poor performance is due to a decline in income while expenses surged. The top-line was affected by shrinking income from financing business, broking related activity and financial advisory services, which dropped both sequentially over Q4 FY13 and over the year-ago period.
The firm’s financials was also affected by a provision of Rs 49.6 crore during the quarter related to long-term diminution in value of investment in Religare Capital Markets Ltd (RCML). The firm attributed this to severe long-term restrictions imposed on Religare Capital Markets, pursuant to the terms of a tripartite agreement between REL, Religare Capital and the promoter owned entity RHC Holding.
RCML focuses on institutional equities and investment banking. During the quarter, RCML acted as exclusive financial adviser to the shareholders of StarAsia Group, a leading Asian fragrance and personal care distributor, on its acquisition by Coty Inc, one of the world's leading beauty and fragrance companies, with revenues in excess of $4 billion.
Religare Finvest Ltd, its lending subsidiary, contributes over 60 per cent of REL’s consolidated revenue and has a SME loan book size of over Rs 9,640 crore. The firm reported a PAT of Rs 39.5 crore, down 20 per cent compared with the same quarter last year.
The firm also saw its net interest margin decline 16 basis point sequentially to 3.86 per cent in the reporting quarter.
REL’s retail broking business, which includes Religare Securities Ltd and Religare Commodities Ltd, contributed 11 per cent of the consolidated revenue in the reporting quarter.
Its wealth management firm, Religare Macquarie Wealth Management Ltd, saw its total asset under management decline to Rs 2,740 crore in the reporting quarter from Rs 2,830 crore in the same quarter last year. The firm saw it client base decline and continues to focus on acquiring new clients and broaden its advisory business.
In September, 2012, REL sold 49 per cent of its stake in Religare Asset Management Company Ltd (RAMC) to NYSE-listed investment management firm Invesco Ltd. In the reporting quarter, Religare Invesco Asset Management Co. Pvt. Ltd saw its AUM grow by 25 per cent to over Rs 13,800 crore.
In the second half of last financial year, REL through one of its arms had acquired PN Vijay Financial Services Pvt Ltd (PNVF), to expand its asset management business besides boosting the portfolio management services and mutual funds advisory units. Last quarter the group put in Rs 2.5 crore in PNVF.
REL is in the process of diluting stake held by its promoters to 49 per cent to enable it to qualify for applying for banking licence under new guidelines issued by the Reserve Bank of India (RBI) early this year. It has also recently struck a funding deal with Customers Bancorp.
(Edited by Joby Puthuparampil Johnson)