Religare Finvest to divest housing finance arm to parent in a bid to revive business

Mumbai: Religare Finvest (RFL) plans to transfer its stake in its home finance arm Religare Housing Development Finance Corporation (RHDFC), to its parent Religare Enterprises (REL), as part of its efforts to come out of the restrictions placed by the Reserve Bank of India. The company is also actively pursuing the recovery of corporate loans and the fixed deposits from erstwhile Lakshmi Vilas Bank which were fraudulently withdrawn by former promoters.

In a review, India Ratings and Research (Ind-Ra) said that it had withdrawn the rating assigned to an Rs 850 crore bank facility, which has been repaid and received no dues certificate from the rated lender. However, the company continues to default on an unsecured exposure of Rs 250 crore from ICICI Bank and Rs 80 crore towards non-convertible debentures – two of its unsecured lenders/investors.
“Timely debt servicing for at least three consecutive months would result in a positive rating action,” Ind-Ra said. It said that the default rating was because of continued delays in debt servicing since April 2019 due to misappropriation of funds by the erstwhile promoters. “The company is still under the corrective action plan advised by the Reserve Bank of India (RBI) since January 2018,” the release said. In 2019, RFL had filed a police complaint against former promoters Malvinder Mohan Singh, Shivinder Mohan Singh and their companies — RHC Holding, Ranchem Private Ltd and Lakshmi Vilas Bank for misappropriation of the company’s FDs. LVBs business was subsequently taken over by DBS. Chairperson Rashmi Saluja is now leading Religare group on behalf of the shareholders. Dabur group, with a 14% stake, is the largest shareholder.

On March 8, 2023, RFL completed a one-time settlement with the secured lenders by making a settlement payment of Rs 218 crore. RFL has paid around 72% of the principal outstanding to its secured lenders and 20% of the principal outstanding to its lenders having unsecured exposure using resources from its balance sheet and with assistance from REL, wherein REL deposited Rs220 crore billion on behalf of RFL against OTS.
“Furthermore, RFL plans to seek removal of the corrective action plan after settling the remaining debt. RFL plans to revive its business with its current collections and will continue to focus on lending secured and unsecured loans to micro, small and medium enterprises and build a granular book,” Ind-Ra said.
RFL is divesting its subsidiary RHDFC (87.5%) to its parent REL, which will help RFL to focus and grow its loan book.