Religare Enterprises’ promoters are looking to sell part of their stake in the group’s public listed financial services holding firm to enable the company to comply with the norms which would allow it to enter banking business.
The firm disclosed that the billionaire brothers Malvinder and Shivinder Singh have agreed to dilute their shareholding to 49 per cent in the company to enable Religare Enterprises to qualify for applying for banking licence under new guidelines issued by the Reserve Bank of India (RBI) early this year. The promoters have appointed Axis Capital Ltd as advisors for the proposed stake sale.
As of March 31, 2013, the promoter holding in Religare Enterprises stood at 71.75 per cent.
Back-of-the-envelope calculations show stake sale to bring it down to around 49 per cent would mean share sale worth around Rs 1,073 crore ($182 million), as per the current market price.
Religare Enterprises is a holding firm for a bunch of financial services—NBFC, stock broking, asset management, investment banking and insurance—businesses. The firm is one of the contenders for new banking licences for which aspiring firms are required to submit applications to RBI by July 1.
The board of Religare Enterprises had requested the promoters to dilute their stake after its meeting on May 23.
Religare's Group CEO Shachindra Nath said the stake is likely to be divested through the secondary market. Given the approaching deadline to apply for the banking licence, the share sale would need to be executed over the next two weeks.
According to the RBI guidelines, the applicant shall be eligible to set up a bank through a wholly owned non-operative financial holding company (NOFHC). The objective for the central bank is that the holding company should ring-fence the regulated financial services entities of a group, including the bank from other activities of the group.
As per the guidelines on banking licences, the NOFHC needs to be held by promoters and the promoter group only through companies in which they hold not more than 49 per cent.
(Edited by Joby Puthuparampil Johnson)