InGovern tells Religare Enterprises’ investors to vote against MIC investment resolution

Proxy advisory firm InGovern has recommended shareholders of Religare Enterprises (REL) to vote against a resolution proposing an investment of ₹15 crore in MIC Investment Web Aggregator, a whollyowned subsidiary of the company.

The shareholders’ meeting will be held on March 21 and the evoting results will be announced on March 23.

InGovern has raised questions over the rationale of the deal citing lack of disclosures and absence of any corelation with the overall core business of REL. The company has sought shareholders’ approval to invest up to ₹15 crore in MIC, along with ratification of a past investment made last December.

The proxy advisory said that REL is already going through an uncertain phase and a regulatory probe. Further, as there is an imminent change in promoters and management which may take place post the takeover by the Burmans, the proposed investment must be kept at bay for now.

RED FLAGS

Raising several red flags on the proposed resolution, InGovern said REL has not disclosed details regarding the financials and the valuation of MIC.

Further, the details of the funding requirement by MIC and its current debtservice records are not available. Pointing out that the investment does not align with REL’s core business, InGovern highlighted that REL has not put on record anything to demonstrate synergy between MIC and the company’s existing insurance broking business. As per InGovern, investing in a web aggregator can give rise to conflict of interest.

WRONG ALLOCATION

InGovern has emphasised that the proposed investment amounts to a wrong capital allocation at a time when there are significant upcoming payables in the form of loans and existing capital that must be deployed in its core business areas. Therefore, the proposed acquisition does not fit in REL’s overall core business and amounts to wrong capital allocation, said InGovern.