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Religare to sell NBFC unit to TCG Advisory for $46.5 mn
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Religare Enterprises Ltd is selling its entire stake in non-banking financial company Religare Finvest Ltd to asset management firm TCG Advisory Services Pvt. Ltd for Rs 330 crore ($46.5 million).

Religare said in a stock-exchange filing that it signed an agreement to sell the small and medium enterprises-focused NBFC to TCG on October 1. It had previously inked a term sheet for the deal in July.

“The consideration will be utilised to repay the outstanding loans to group companies, third parties and for other general corporate purpose,” it added.

The transaction, subject to statutory and regulatory approvals and fulfilment of other conditions, is expected to complete before December 31.

Religare Finvest also owns a majority shareholding in housing finance provider Religare Housing Development Finance Corporation Ltd (RHDFCL).

According to the filing, Religare Enterprises has settled its dispute with Axis Bank, which was restraining its capital raising plans. In a separate filing, it said the payment of Rs 170 crores shall be made in phased manner to Axis Bank in accordance with the consent agreement.

Nitin Agarwal, Group CFO at Religare Enterprises Limited and CEO, Religare Broking Limited, said the divestment of our NBFC business will help conserve capital for the company and allow us to focus on other businesses of the group.

“It’s a win-win deal for REL and TCG, who can help grow the NBFC business with a long term capital commitment,” he added.

Troubles for Religare

On December 17 last year, the company filed a complaint with the corporate affairs ministry and the Securities and Exchange Board of India (Sebi) against the Singh brothers, and former chairman and managing director Sunil Godhwani, seeking an investigation into suspicious transactions in Religare Enterprises and its subsidiaries.

Subsequently, in March, the capital markets regulator asked Religare Enterprises and Religare Finvest to recall loans of Rs 2,315 crore given to Singh brothers’ other entities.

The company's auditor Price Waterhouse highlighted in a report on Religare's results for the financial year ending March 2017, the directions from RBI in January over the corporate loan portfolio of Religare Finvest.

Further, the company was then put under the Reserve Bank of India’s (RBI) corrective action plan (CAP), restraining it from further lending activity.

In its March 2016 letter, the central bank also noted that Religare Finvest had an unsecured loan exposure of Rs 1,156 crore under corporate loan book, which was “sanctioned only on the basis of a vintage relationship without taking into account the financial fundamentals of the borrower.”

Later in July, the Singh brothers, who were not on the boards of Religare Enterprises for over six years, have come back as chairman and vice-chairman of the company. Followed which, Religare Enterprises planned to merger several of its subsidiaries with itself, except Religare Finvest.

The scheme of merger of Religare Commodities iwith Religare Broking was withdrawn in May this year.

The Group now offers SME loans, affordable housing loans, health insurance services and retail broking services through its subsidiaries.

At the end of March 2019, Religare Finvest had a balance sheet size of about Rs 7,100 crore, with exposure to small and medium sector enterprises (SME) at about Rs 6,000 crore, which was around Rs 16,000 crore in 2016. The company’s fortunes have been sliding owing to actions of the erstwhile promoters Singh brothers.

Revival efforts

Religare now says it is in advanced stages of restructuring its debt and improve capital ratios to come out of the CAP restriction from the banking regulator.

Religare Finvest is now being revived by a new management team led by banking veteran Sanjay Palve, MD & CEO of Religare Finvest and Religare Housing Development Finance Company.

Palve said in a statement that, with TCG coming in as a promoter shareholder, we have strong backing of capital and long-term commitment towards business.

It has ensured recovery from large borrowers and has entered into strategic tie-ups with banks for sourcing deals for them. “We are very confident that the revival of Religare Finvest will set an example in the NBFC sector,” Palve said.

“Religare’s turnaround could provide much needed ray of hope to financial services sector in a time when every day negative news flows,” he added.

The original promoters' stake in Religare Enterprises has now reduced to around 1% and the company has applied for declassifying them as promoters. Now majority-owned by institutional investors and family offices and governed by an independent board, the new management is trying to turnaround and revive the group's fortunes.

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