Corporate Development

Published: Jun 15, 2022
Updated: Jun 15, 2022

Resolving legacy issues, eyeing growth - RELIGARE ENTERPRISES

There were certain highly sensitive and legal issues raised by SEBI against NSEBSE listed Religare Enterprises (REL), pertaining to its operations for the period 2011- 2018, when the control and management of the company rested with its erstwhile promoters Malvinder Mohan Singh and Shivinder Mohan Singh. In order to resolve legacy issues, the professionally managed present management opted for a settlement with the SEBI “without admitting or denying the findings of fact and conclusions of law mechanism.”

The two issues were resolved recently with SEBI by making payments of Rs 5.42 crore and Rs 5.09 crore respectively by REL and its wholly owned subsidiary Religare Finvest Ltd (RFL). In the case of RFL, there were allegations of financial mismanagement and diversion of funds to the tune of Rs 2,473.66 crore through a material subsidiary of REL for the ultimate benefit of the then promoters.

WIN-WIN DEAL

Dr Saluja said, “RFL’s OTS is a win-win solution for the lenders and the company, especially for its revival and expansion. With the completion of OTS, all the legacy issues will be behind us and the Religare group will stride forward to focus on future growth and becoming a 360-degree financial services provider.”

REL is in the process of merging its four direct/indirect wholly owned subsidiaries, namely Religare Comtrade Ltd, Religare Insurance Ltd, Religare Advisors Ltd and Religare Business Solutions Ltd. This merger scheme has been moved for a second motion for its approval with NCLT and is designed to eventually simplify the group’s corporate structure

Recently, REL’s two wholly owned subsidiaries, Religare Broking Ltd (RBL) and Religare Digital Solutions Ltd (RDSL), have approved a scheme of arrangement between them. RDSL, the transferee company, is a wholly owned subsidiary of RBL, the transferor company. The scheme provides for transfer of the e-governance undertaking of RBL to RDSL as a going concern on a slump sale basis.

The consolidated revenue from operations increased from Rs 2,492.45 crore in FY21 to Rs 3,223.62 crore in FY22, reporting a rise of Rs 731.17 crore (29.34%), largely contributed by income from the insurance premium of Rs 779.68 crore (45.08%) whereas the second largest revenue earner, interest income, reduced by 15% from Rs 543.21 crore to Rs 461.71 crore. The income from sale of services, mainly from broking operations, showed a reasonably good rise of Rs 23.53 crore (11.48%) to Rs 228.37 crore over Rs 204.85 crore in the previous year.

REL reported a net loss of Rs 1,538.51 crore against a Rs 477.82 crore loss in FY21, resulting in a negative EPS of Rs 51.33 vis-à-vis Rs 19.69 in the previous fiscal. Impairment and loss allowances on financial instruments were higher at Rs 389.55 crore against Rs 94.43 crore in FY21. On its Rs 318.81 crore equity capital, the company has an accumulated loss of Rs 1,301.08 crore.

MORE MARKETSHARE

REL’s subsidiary, Care Health Insurance Ltd (CHIL), the real backbone of the company as on date and in the business of health insurance, has fared significantly better in the financial year gone by. Expressing her pleasure, Dr Saluja informed that “Religare’s health insurance, housing finance and broking subsidiaries are already on a growth trajectory, harnessing their full potential with increasing marketshare and profitability.”

In addition to stock options granted to employees, in July 2021 the company also made a preferential allotment of 5,41,56,761 equity shares at an issue price of Rs 105.25 per share of Rs 10 each (including a premium of Rs 95.25 per share) and raised Rs 570 crore from the issue. Out of this, the company has utilised Rs 50 crore for an equity investment in Religare Broking Ltd, its wholly owned subsidiary, and Rs 68.58 crore and Rs 185.50 crore respectively for loan repayments to two other wholly owned subsidiaries, Religare Comtrade and Religare Finvest. The balance Rs 265 crore is parked in short-term money market mutual funds.

It is interesting to note that the initial equity shares during the year under stock options were allotted at an exercise price ranging from Rs 24.10 to Rs 39.55 per share. However, 3,50,000 stock options have been granted thereafter in November 2021 at a grant price of Rs. 159.25 per share. Currently, the equity capital stands increased to Rs 318.94 cro

REL along with its subsidiaries offers an integrated suite of financial services. The group reaches over one million policyholders in the insurance business, one million-plus broking customers, more than 26,000 customers in MSME finance and over 10,000 customers in affordable housing finance. With more than 11,000 professionals in its fold, the group has a presence in 1,000- plus locations across India with an improved and reinstated brand equity

BIZ SYNERGIES

In the current FY23, in addition to growing its existing subsidiaries, REL is going to enter new strategic businesses including insurance broking, digital wealth management, asset reconstruction and alternative investment funds so as to embark on a new era of growth. The identified sectors have business synergies with the existing businesses of REL and hence the management expects a multiplier effect in the group’s performance.

It is important to summarise the major positives which are in different stages of implementation under the new management during the last couple of years. These include: Initiated recovery from the erstwhile promoters of REL fixed deposits of Rs 791.45 crore receivable (excluding interest of Rs 27.03 crore) from Lakshmi Vilas Bank, big haircut anticipation under OTS from the lenders at RFL, Rs 793.67 crore recovery from Strategy Credit Capital Pvt Ltd. These, supported by a strong, vibrant, expanded growth-oriented business model, augur well and have substantial and genuine turnaround potential for the Religare group in the next 12-18 months.