Religare Enterprises (REL) has entered into a binding term sheet with TCG Advisory Services Pvt Ltd for sale of its entire stake in its troubled NBFC arm, Religare Finvest (RFL) along with RFL’s housing finance subsidiary, Religare Housing Development Finance Corporation (RHDFC).

The transaction is subject to necessary regulatory approvals as well as signing of the final transaction documents between both parties.

“For the entity (RFL) to stand on its feet, we thought this (selling it to TCG) is the best option for us, to part ways with that business and create value for the shareholders of REL,” Sanjay Palve, CEO — RFL, and MD – RHDFC, told BusinessLine . Citing confidentiality agreement with the buyer, Palve declined to disclose the consideration of the transaction. He, however, said that this transaction is going to result in value-creation for REL’s shareholders.

REL, which has about 85 per cent stake in RFL, will buy the remaining 15 per cent from other shareholders, and then sell the entire 100 per cent in RFL to The Chatterjee Group (TCG). This transaction will mark the entry of TCG, a diversified business conglomerate with interests in petrochemicals (Haldia Petrochemicals), life sciences, real estate and software, into financial services.

Palve said that all the companies in the Religare Group, including RFL have standard accounts with banks. “All the companies in the Group, as on date are current (standard), with the banks. None of them are non-performing assets as on date,” he said.

Turn for good

With this new transaction — a new investor putting in money and banks taking a favourable view and also change in management and control — he felt that things will become better for RFL.

REL will also be able to clear the internal liabilities, have some liquidity with them and focus on the remaining businesses of insurance and broking, he added.

Palve said that RFL as of end March 2019 had a balance sheet size of about ₹7,100 crore, including small and medium business exposure of about ₹6,000 crore. In 2016, RFL’s exposure to small and medium businesses was about ₹16,000 crore. From then on, the company’s fortunes had been sliding owing to actions of the erstwhile promoters.

Palve also said that this transaction will aid the implementation of the ongoing debt resolution process in RFL, as well as provide necessary capital support to boost future growth of the businesses.

On RFL’s housing finance arm RHDFC, Palve said the total loan book size stood at ₹750 crore. RFL has 87.5 per cent stake in RHDFC.

‘Inflection point’

“This is an inflection point in the journey of Religare Group, which galvanises the Group towards a new phase of growth,” he said.

Reacting to the news about the proposed stake sale of RFL, the shares of REL went up 9.96 per cent on the NSE to close at ₹43.05 on Thursday.

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