India: Singh brothers struggle to sell Religare stake

Visual from Religare website

Malvinder Singh and Shivinder Singh, promoters of Religare Enterprise Ltd (REL), haven’t been able to sell their stake in the financial services group because most potential buyers are interested in parts of the business, but reluctant to buy all of it, according to multiple people involved in the process.

Earlier this year, the Singh brothers mandated JPMorgan Chase and Co.’s Indian unit to look for buyers for their 50.93% holding in REL.

Back then, several private equity funds and one pension fund evinced interest. The list included Bain Capital Llc, Barings Private Equity Asia Pte. Ltd, Everstone Capital Advisors Pvt. Ltd, Canada Pension Plan Investment Board (CPPIB) and Multiples Alternate Asset Management Pvt. Ltd, bankers and fund managers said.

Also Read: Bain Capital, Baring Asia among potential suitors as Singh Brothers look to exit Religare: Report

The negotiations have gone nowhere.

“We did due diligence very closely but we realised that some of the businesses are not doing well, although we would be happy to take up (a) few of the verticals,” said a fund manager who asked not to be identified.

REL operates in four main businesses—financing of small and medium enterprises, capital markets and wealth management, health insurance and asset management.

A second fund manager and two investment bankers whose companies have been in talks with the Singhs cited similar issues. None of them wished to be identified.

“We backed away from the transaction as it did not make sense to acquire the entire clutch. We were not keen to acquire the asset management business,” said a consultant who was advising a global private equity fund on this transaction and did not wish to be identified.

In emailed responses, CPPIB, Everstone Capital, Barings Asia and Bain Capital declined to comment. Multiples didn’t respond to an e-mail seeking comment.

“As stated earlier we remain committed to our path of raising primary capital at the Religare Enterprises level and will stay the course,” Religare said in an emailed response.

“We mandated JP Morgan to run this process for us. However, owing to reasons of confidentiality we would not like to discuss specific names of entities that we have been and are engaging with. Discussions such as these for a large and diversified portfolio like ours take time to mature and fructify. We have a healthy, profitable and market leading portfolio straddling the entire spectrum of financial services managed by a best in class team and supervised by an independent governance layer. We will not do anything hasty that doesn’t align with the larger interests of all relevant stakeholders to unlock the true potential of this platform, built with great diligence and rigor over the last almost 2 decades,” it added.

According to an investor presentation made by the company at the end of the June quarter, the lending business accounted for 59% of its revenue, followed by the asset management business, at 21%.

In the quarter ended 30 June , the company reported operating income of Rs.85.45 crore, up 58.77% compared with the same quarter last year. Profit was Rs.37.15 crore compared with a profit of Rs.12 lakh in the comparable quarter last year.

Bankers say that while investors are interested in the lending business, not too many are interested in the asset management business.

REL has several financial investors, including World Bank arm International Finance Corporation which holds 7.19% in the company, and India Horizon Fund Ltd and CB Green Ventures Pte. Ltd, which together own around 10%.

Progress on the deal is slow also because of the high asking price of the promoters, the second fund manager said.

At Monday’s closing share price, REL’s market capitalization was Rs.5,222.39 crore. Shares of Religare closed at Rs.294, up 0.68% on the BSE on Monday. The exchange’s benchmark Sensex closed at 26,785.55 points, up 2.15%.

Promoters have been seeking an enterprise valuation of close to Rs.7,200-8,000 crore, the second fund manager added. At the higher end of valuation expectation the deal could have fetched the promoters up to Rs.4,000 crore.

According to Raja Lahiri, partner at Grant Thornton India Llp, while interest in the financial services space is high, valuations are a key concern.

“There is huge interest from private equity funds to acquire assets in the financial services space. But the biggest challenge for acquiring these assets is valuations; there are few funds that have the capital to close big transactions,” said Lahiri.

There have been a number of big ticket deals in the non-banking finance company space this year. In July, French bank BNP Paribas SA bought brokerage Sharekhan Ltd for Rs.2,240 crore. The same month, Canada’s Fairfax India Holdings Corp. announced an open offer to acquire 26% in IIFL Holdings Ltd from the open market, in a deal valued at over Rs.1,600 crore.

Also Read: Rohatyn Group to divest Sharekhan stake to BNP Paribas

In 2008, the Singh brothers exited the pharmaceuticals business by selling their controlling stake in Ranbaxy Laboratories Ltd to Japanese firm Daiichi Sankyo Company Ltd for $4.6 billion.

Another company promoted by them, Fortis Healthcare Ltd, has also been shedding international assets. Fortis sold its entire stake in RadLink-Asia Pte Ltd to Fullerton Healthcare Group Pte Ltd for SG$111 million (around Rs.531 crore) in May 2015. It also sold Fortis Surgical Hospital in Singapore to Concord Medical Services (International) Pte Ltd for SG$55 million (Rs.250 crore) in March.

Fortis Healthcare had debt of Rs.1,183 crore on its books as of 31 March.

Also Read:

India: Fortis Healthcare to buyback 3.1% in SRL for $16m

Indian hospital chain Fortis Healthcare puts its Dubai assets on sale

Fortis to sell RadLink unit in Singapore for $83.5m to Fullerton Healthcare

This article was first published on Livemint.com

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.