Religare to sell entire stake in NBFC arm to TCG Advisory Services for Rs 330 Cr

Religare Enterprises is selling its entire stake in NBFC arm Religare Finvest Ltd for Rs 330 crore. The transaction is expected to be completed before December 31, 2019.

Religare Enterprises is selling its entire stake in NBFC arm Religare Finvest Ltd (RFL) to TCG Advisory Services for around Rs 330 crore, according to a regulatory filing on Wednesday.


Religare Enterprises (REL) in the filing said that a share purchase agreement had been signed with TCG for selling stake in RFL, which is an SME-focused NBFC and also owns a majority shareholding in housing finance provider Religare Housing Development Finance Corporation Ltd (RHDFCL).


REL in July 2019 had signed a binding term sheet with TCG Advisory Services to sell its NBFC and housing finance businesses.


According to the filing, REL is divesting its entire stake in RFL for Rs 330 crore. The transaction is subject to receipt of statutory and regulatory approvals, and fulfillment of other conditions. It is expected to complete before December 31, 2019.


"The consideration will be utilised to repay the outstanding loans to group companies, third parties, and for other general corporate purposes," the filing said.


REL, in a release, also announced settlement of a dispute with Axis Bank, which was "restraining" the capital raise plans in its various group companies.


The company was mired in controversies in the past due to alleged financial mismanagement by promoters Malvinder and Shivinder Singh.


"Currently the promoter stake has reduced to around 1 per cent and REL has applied for declassifying them as promoters. The company is now majority owned by a set of institutional investors and family offices, governed by an independent board, and a new management is trying to turn around the fortunes of the group," REL said.


The non-banking financial company (NBFC) arm Religare Finvest is now being headed by a new management team under Sanjay Palve, the MD and CEO of the company. Palve also heads the housing finance subsidiary RHDFCL, of the Religare group.


Religare said that in last one year the new team has done a cleanup of books, improved corporate governance, and strengthened the internal processes/risk management.


"The company which was put under RBI's Corrective Action Plan (CAP), restraining it from further lending activity, is in advanced stages of restructuring its debt and improve capital ratios to come out of CAP restriction from RBI," it added.


Unlike many of its peers, it is able to keep its account standard with banks despite having asset liability mismatch and RBI cap restrains.


"...the revival of Religare Finvest will set an example in the NBFC sector. With TCG coming in as a promoter shareholder, we have strong backing of capital and long-term commitment towards business. Our lenders are also positive to complete the restructuring of debt to ensure sustainable growth of company and their interest," Palve said.


Religare Finvest, which is attempting a business revival along with restructuring of its debt, requires sustained capital commitments, Religare 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," said Nitin Agarwal, Group CFO, Religare Enterprises Limited (REL), and CEO, Religare Broking Limited.

(Edited by Teja Lele Desai)


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