religare finvest: OTS complete, Religare Finvest looks to expand business

Religare Finvest Limited (RFL), has completed the Rs 2320 crore one-time-settlement (OTS) with sixteen lenders led by State Bank of India (SBI) less than three months after signing the initial agreement with banks. Executive chairperson Rashmi Saluja the company is now free to expand its business and will increase lending to micro small and medium enterprises (MSMEs) and also its mortgage vertical.

“We have completed the OTS three weeks before the March 31 deadline. In the next one year we will now look at a granular expansion in our loan book and concentrate on sectors like healthcare and hospitals where we have some expertise,” Saluja said.

In December, creditors to RFL approved settling of their Rs 5344 crore dues to more than a dozen lenders, with an immediate payment of Rs 2320 crore, a 57% haircut. A majority of the settlement has been paid from loan recoveries of the company. Saluja said higher recoveries meant that shareholders of the parent Religare Enterprises Ltd (REL) had to infuse Rs 220 crore which was lower than the Rs 400 crore envisaged in the initial OTS plan.

“We now plan to raise funds for our future plans to make RFL a 360 degree financial services company, adding businesses like alternative investment funds, asset reconstruction company and wealth aggregation among other. We expect to raise Rs 500 crore to Rs 600 crore through a preference issue in the next three months which will be used for M&A or expansion of the business,” Saluja said.

Saluja has previously told ET that the shareholders are ready to invest more funds because of the growth prospects of the business. The Burman family of Dabur has the largest stake in REL with 14% stake. Other shareholders in the company include Motilal Oswal, Samco Group, SSG Capital and International Finance Corp (IFC). Private equity company Kedara Capital owns about 15% in its health insurance business Care Health.

The debt settlement with lenders means that the company is now debt free with a capital adequacy of 19%. RFL’s loan book which was Rs 16,000 crore at peak before the siphoning off funds is now down to Rs 1,000 crore.

Saluja said the company plans to make Religare Housing Finance Ltd (RHFL) a direct subsidiary of REL which will simplify the company’s structure and also ensure capital directly flows from the parent to the housing finance company to take advantage of the opportunities in the affordable housing space.”Our health insurance subsidiary Care Health has enough capital and even our broking business is on its own. With this settlement of legacy issues, we can now build our other businesses for which potential is huge,” Saluja said.

Saluja, a doctor by qualification, joined the Religare board in December 2018 after the previous promoters stepped down amid allegations of siphoning off funds from the company. She chairs the board of all four financial arms of the group and has spearheaded the new management’s efforts to get the companies out of bankruptcy.

RFL has been under RBI’s corrective action plan (CAP) since January 2018, which restricts it from expanding business, including giving new loans.

The settlement with lenders envisages Rs 2,150 crore to secured creditors, Rs 80 crore to the provident fund trust of the employees and a 20% recovery for unsecured creditors. It also includes a payment of at least Rs 500 crore after six years from a possible settlement of RFL’s dispute with the erstwhile Lakshmi Vilas Bank, which had taken over deposits from the company to settle loans taken by the previous promoters.