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Religare Finvest in big one-time bad loans write-off

15 November, 2016

Religare Finvest Ltd (RFL), a material subsidiary of Religare Enterprises Ltd, has decided to write off around Rs 794 crore (around $117 million) owing to non-receipt of dues related to some loans sanctioned by the non-banking financial company, it said in a statement.

The company’s board has approved a one-time write-off of about Rs 520 crore in its profit and loss account.

It has also approved a write-off of about Rs 274 crore standing overdue in other accounts.

When contacted, the company spokesperson said, 

“In the loans against shares (LAS) book of Religare Finvest, the company had entered into an assignment transaction for various client accounts, wherein the underlying scrip was ABG Shipyard. Since there was a dispute with the counterparty, the board approved a one-time write off on the entire amount receivable of Rs 519.92 crore from the counter party.”’

Further, as a prudent measure, a decision was also taken to write off an additional exposure of Rs 273.75 crore, overdue in other accounts related to the same counterparty, the spokesperson said.

The company said all necessary steps have been taken to ensure adequate and appropriate capitalisation of the business and the shareholders are allocating additional capital and remain committed to keep growing he firm’s SME focused lending portfolio.

Religare Enterprises, which is controlled by billionaire brothers Malvinder and Shivinder Singh, has seen through a series of business divestments in the past year and announced a three-way demerger of its remaining operations. It has also received interest for its lending business from private equity investors, who are interested in only some part of the portfolio and it is possible that more than one private equity firm could be buying the asset.

RFL, which is focused on providing debt capital to the SME segment, reported a disbursement of Rs 9,164 crore for the year ended 31 March 2016. It reported a growth of 26% in total loans and advances of Rs 18,118 crore as of March 2016.

It also posted revenues of Rs 2528 crore and a profit after tax of Rs 295 crore, indicating growth of 17% and 15%, respectively, over the previous financial year. It had a balance sheet size of Rs 21,049 crore and capital adequacy (CAR) of 16.7% as on 31 March 2016.

At present, it offers unsecured and secured SME loans, short term trade finance, capital market loans and individual loans. It has 83% of its exposure from secured asset finance while the rest is contributed by unsecured and capital market lending, according to a September 2016 presentation by the company.

The company raised Rs 150 crore and Rs 200 crore from Avigo Investments and Jacobs Ballas India Fund, respectively, through compulsory convertible preference shares in FY2011-12.

Religare Finvest also has a joint venture with Equifax Inc and six other Indian financial institutions to run Equifax Credit Information Services Pvt. Ltd.  RFL in turn also owns 87.5% stake in Religare Housing Development Finance Corporation Ltd (RHDFCL) that focuses on the affordable housing segment.

Shares of Religare Enterprises fell 7.32% to Rs 248.90  during the noonsession on BSE on Tuesday while Sensex fell 1.19%.

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Religare Finvest in big one-time bad loans write-off

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