Religare Finvest Submits Two Resolution Plans To RBI
Small business lender Religare Finvest Ltd. has submitted two potential resolution plans to the Reserve Bank of India for final approval before implementing one of them. The company is looking to restructure Rs 4,500 crore in debt owed to lenders led by State Bank of India, according to three people with direct knowledge, who spoke on conditions of anonymity.
The first resolution plan involves selling the lending businesses under Religare Finvest to U Gro Capital Ltd, a non-banking finance company owned by Shachindra Nath, for Rs 400 crore. This will include purchasing the SME and housing finance businesses under Religare Finvest.
Nath was chief executive officer of Religare Enterprises till 2016. He went on to purchase a listed NBFC, Chokhani Securities Ltd. in 2018 before renaming it U Gro Capital.
Religare Finvest at present has a negative net worth and almost all of its debt is unsustainable, prompting lenders to agree to a large haircut, the first of the three people cited earlier said. As of Sept. 30, 2020, U Gro Capital had a capital adequacy ratio of 85.8% and assets under management worth Rs 978 crore.
Since 2018, U Gro Capital has managed to raise $130 million (Rs 975 crore) in equity capital from institutional investors. These investors include private equity firms such as Samena Capital, Indgrowth Capital, Abakkus Investing and Newquest Asia Investments, insurer PNB Metlife Insurance and Kamal Kishore Sarda’s Chhattisgarh Investments Ltd., according to information on the U Gro website.
The second resolution plan, prepared by the current employees of Religare Finvest led by CEO Pankaj Sharma, aims to restructure the company’s dues by deferring repayments by 5-7 years, under the June 2019 circular of the RBI. Employees of the NBFC, including the current management of the firm, would also seek equity infusion from interested investors during the repayment moratorium.
Lenders to the company have approved both resolution plans and are awaiting a nod from the regulator. Last year in March, a resolution plan by Religare Finvest to bring in The Chatterjee Group as an equity investor was rejected by the RBI.
“The company is working with all stakeholders including lenders, regulators and potential investors towards correcting the asset-liability mismatch and revival of new business,” a spokesperson for Religare Finvest said in an emailed response. “We’re making positive progress and are confident of successful approval and implementation of the debt resolution plan in near future.”
Sharma didn’t respond to requests for comments. SBI and RBI didn’t respond to queries mailed on Tuesday, while U Gro Capital declined to comment.
Religare Finvest reported assets under management worth Rs 5,306 crore as of March 31, 2020, with gross non-performing assets worth Rs 3,260 crore, according to its annual report. The bad loans include the company’s entire corporate loan book of Rs 2,036 crore, which is fully provided for.
Shivinder and Malvinder Singh, erstwhile promoters of Religare Enterprises, have been charged with alleged siphoning-off of funds from the company and wholly-owned subsidiary Religare Finvest.