Private equity firms Bain Capital and Baring Asia among others are in the fray to buyout Religare Enterprises Ltd (REL), after its promoters, billionaire brothers Malvinder Singh and Shivinder Singh, have put their stake in the financial services group up for sale, a report said.
According to a report from the Economic Times, the Singh brothers, Malvinder Singh and Shivinder Singh, are planning to exit their promoter stake in the integrated financial services platform that has interests in brokerage, asset management, lending solutions, investment banking, wealth management and insurance.
As of March 2015, the promoter group owns 50.9 per cent of REL which acts as a listed investment holding company for all the different businesses.
While not guaranteed that negotiations will translate into a deal, a change of control will also trigger an open offer for an additional 25 per cent equity. If fully subscribed to, any new owners may end up with a 75 per cent stake in REL. The current market capitalisation of Religare Enterprises is $1.05 billion. A 51 per cent stake sale will generate at least $535 million, with IFC Washington, the private sector lending arm of the World Bank, holding a near 8 per cent stake in REL, their largest exposure in Asia.
REL has publicly denied any plans of the promoter stake being divested, according to the report, stating: “As the holding company for a large diversified financial services group, Religare Enterprises Limited remains committed to all its businesses; structured around the four core pillars of SME finance, capital markets and wealth management, health insurance and asset management. Each business is unique, well differentiated and is in their respective stages of evolution. We don’t have plans to sell any of our assets.”
“Ever since IFC came on board, we had decided that future growth of the company should ideally come from outside capital. We already have a board resolution to raise Rs 1,000 crore to increase our capital base. So far, the market was not conducive for a large fund raise and we were also waiting for the fiscal to close to show our business turnaround…conversations with PE players for any fund raise is an ongoing event. But there is nothing more that is happening,” explained Shachindra Nath, group CEO, Religare Enterprises.
Commenting on the possibility of a deal, an investment banking source approached by the Economic Times shared: “Other than the SME lending piece and the AMC, most of the other pieces are loss-making. So I don’t know to what extent there will be interest. There could be takers at a discount to book. I also doubt if the existing management team will find much traction. It’s a very high cost ship.”
The lending business dominates REL’s total revenues, contributing the biggest chunk at 48 per cent and is one of India’s largest SME lenders. The global asset management arm comprises offshore funds with assets under management (AUM) amounting to $20 billion. The rumoured exit comes as analysts believe that due to a failure to grow beyond the Indian market, the Singh brothers wish to exit at a good valuation.
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