Edelweiss, Piramal in race to buy 2 Religare arms

Private equity fund AION Capital Partners has shown interest only for the housing finance business

The race to buy a majority stake in the subsidiaries of Religare Enterprises is heating up with three entities, which include private equity funds and corporates, in talks to buy out its small and medium enterprise-focused non-banking financial company (NBFC) and its housing finance business. 

According to sources, Piramal Enterprises and the Edelweiss group are in talks to buy both the businesses of Religare Enterprises as a block. Private equity (PE) fund AION Capital Partners has shown interest only for the housing finance business. 

It is also believed that PE fund True North was in preliminary talks for the housing finance business but a spokesperson of the company said, “We are not in talks for this deal as of today.”

According to merchant bankers, the valuation of the two businesses together should be in the range of Rs 11,000-13,000 crore, with a significant valuation coming from its small and medium-sized enterprise (SME) finance business. 

A Religare Enterprises spokesperson said the firm would not like to comment on speculation. AION, Edelweiss and Piramal Enterprises spokespersons declined to comment.  

Religare Enterprises controls 99.99 per cent in Religare Finvest, an SME financing-focused NBFC. It offers an array of services like mortgage loans, working capital loans and trade finance. With over 30 branches across the country, it had a book size of Rs 18,118 crore in March 2016. With revenues of over Rs 2,632 crore, it constitutes the bulk of the revenue for Religare Enterprises. It also had a low net non-performing asset of 2.3 per cent on a 90-day basis, and 1.77 per cent on a 150-day basis. It has a secured asset finance portfolio of 83 per cent. 

Religare Housing Development Finance Corporation, which is the second subsidiary, offers loans to the low-income segment, primarily people working in the informal sector. The company has revenue of over Rs 106 crore, and has a book size of Rs 829 crore.  

Religare Enterprises, a publicly listed company, is controlled by brothers Malvinder and Shivinder Singh. Just a few months ago, the holding company had announced it was selling 80 per cent in Religare Health Insurance to a group of investors led by True North for around Rs 1,040 crore. The investors in the consortium included Faering Capital and Gaurav Dalmia.

The holding company also controls a capital markets business, which includes 1.14 million broking clients. It has a consolidated revenue of Rs 4,500 crore but, based on its March 31, 2016, results, made a loss of Rs 48 crore.  

The brothers have also put their health care business, which includes Fortis Healthcare and SRL Diagnostics, on the block. TPG Capital, General Atlantic and IHH Healthcare Berhad have shown interest in buying a majority stake in the company. However, the deal came under a cloud when Daiichi went to court saying that the sale was in contravention of an earlier order. But the Delhi High Court allowed the deal to go through with conditions.

The Japanese giant has been locked in battle with the Singh brothers, alleging they had withheld information while selling the Ranbaxy for $4.6 billion in 2008. The brothers have challenged this allegation.