Religare shares crash 20% on lingering concerns

Hits 52-week low of ~102.35, a 40% fall since annual results

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

Shares of Religare Enterprises fell 20 per cent on Tuesday on heavy volumes. At Tuesday’s close of ~102.35 on the BSE, the shares have halved from their value three months ago. Over 3 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 per cent in Religare. About 87.8 per cent 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 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, the company has sold its interests in several businesses, such as life insurance, asset and wealth management. It is currently in the process of getting approvals for the 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, have been a drag on the financials. Last month, it reported a loss of ~157 crore for the financial year ended March 2017.

A Religare spokesperson declined to comment on share price movements. The company did not have any announcements to make on Tuesday.

In a note to the results, it had drawn notice to a writeoff of ~790 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 Ltd (SCCPL), for a total consideration of ~530 crore.

SCCPL had paid an initial consideration of ~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 Religare Finvest yet. Hence, the legal proceedings have been initiated against SCCPL for recovery of the amounts due. Considering the non-receipt of the balance purchase consideration and other developments, Religare Finvest has written-off the entire amount of ~51,991.51 lakh in the profit-and-loss account. Further, an amount of ~27,375.68 lakh 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 the Reserve Bank of India-ordered unwinding of ~1,800-crore corporate loan book were mentioned in the auditor’s report . The shares have remained weak since and have fallen from ~170 on June 30, the day of the results, to ~102 on Tuesday, a fall of about 40 per cent.

In a June report, India Ratings said, “Post the one-off credit losses in Religare Finvest, Religare Enterprises 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.