Religare shares crash on lingering concerns

Hit 52-week low of Rs 102.35, 40% fall since results

The Shares of Religare Enterprises fell 20% on Tuesday on heavy volumes. At Tuesday’s close of Rs 102.35 on the BSE, the shares had halved from their value three months ago. Over three million shares were traded on the bourses. 

Billionaire brothers Malvinder Mohan Singh and Shivinder Mohan Singh directly and through holding companies RHC Holding and RHC Finance own 50.89% in Religare. About 87.8% of this holding has been pledged with lenders. The steep fall in prices could put pressure on lenders holding these shares. 

A Religare spokesperson said, “Please note that no lenders have sold or are selling any shares of Religare (REL) pledged by the Promoters. As you know prices are determined by demand and supply and other market dynamics.”  

The financial services firm has been divesting key assets to focus on core businesses. 

Over the past year or so, it has sold its interests in several businesses such as life insurance, asset management and wealth management. It is currently in the process of getting approvals for its proposed sale of its health insurance business. It is also in the middle of a restructuring process where it is separating its broking business and merging other subsidiaries with itself.

But, the big write-offs in its lending arm Religare Finvest (RFL) has been dragging the financials. Last month, it reported a loss of Rs 157 crore for the financial year ended March 2017. 
 

In a note to the results, it had drawn notice to a write-off of Rs 520 crore in connection with dealings with a company called Strategic Credit Capital. In 2015, Religare Finvest had entered into an agreement for direct transfer of 12 accounts with Strategic Credit Capital Private Limited (SCCPL), for a total consideration of Rs 530.02 crore. 
 

SCCPL had paid an initial consideration of Rs 10 crore and had issued stand-by letter of credit (SBLC) for the balance amount.

“As the dues were not paid by SCCPL in spite of regular follow-ups, the SBLC was invoked. However, the SBLC has not been honoured and payment has not been received by RFL yet. Hence, the legal proceedings have been initiated against SCCPL for recovery of the amounts due. Considering the non-receipt of the BPC and other developments, RFL has written off the entire amount of Rs 51,991.51 lacs in the Profit and Loss account. Further, an amount of Rs 27,375.68 lacs standing overdue in two accounts related to the same assignment transaction has also been written-off,” Religare said in the note to accounts. 
 

These and the matter of RBI ordered unwinding of Rs 1,800 crore corporate loan book was mentioned in the auditor’s report. The shares have remained weak since and have fallen from Rs 170 levels on June 30, the day of results to Rs 102 on Tuesday, a fall of about 40%.

In a June report, India Ratings said, “Post the one-off credit losses in RFL, REL had infused equity into RFL which strengthened RFL’s equity buffers. Ind-Ra expects RFL to resume payment of dividends to REL from FY18, which would keep the rating linkages intact.” It also said the restructuring process would help its deleveraging process.