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Religare Finvest (RFL) is charting a strategic path forward by transferring its stake in Religare Housing Development Finance Corporation (RHDFC) to its parent company, Religare Enterprises (REL). This move aims to overcome regulatory restrictions imposed by the Reserve Bank of India. Additionally, RFL is actively engaged in the recovery of corporate loans and fixed deposits that were deceitfully withdrawn from the defunct Lakshmi Vilas Bank by former promoters.
India Ratings and Research (Ind-Ra) conducted a review, resulting in the withdrawal of ratings assigned to an Rs 850 crore bank facility, which has been fully repaid and obtained a no-dues certificate. However, RFL continues to face default on unsecured exposure, amounting to Rs 250 crore from ICICI Bank and Rs 80 crore in non-convertible debentures, impacting two of its unsecured lenders and investors.
Ind-Ra emphasizes that timely debt servicing for a consecutive three-month period would positively impact RFL's rating. The default rating stems from persistent delays in debt servicing since April 2019, attributed to the misappropriation of funds by former promoters. The company has remained under the corrective action plan advised by the Reserve Bank of India since January 2018. Notably, RFL filed a police complaint against ex-promoters Malvinder Mohan Singh and Shivinder Mohan Singh and their affiliated entities — RHC Holding, Ranchem Private Ltd., and Lakshmi Vilas Bank — for fraudulent withdrawal of the company's fixed deposits. DBS subsequently acquired the business of Lakshmi Vilas Bank, and Rashmi Saluja now leads the Religare group as the chairperson on behalf of the shareholders. The largest shareholder, with a 14 percent stake, is the Dabur Group.
On March 8, 2023, RFL successfully completed a one-time settlement with secured lenders, making a payment of Rs 218 crore. This settlement accounts for approximately 72 percent of the outstanding principal owed to secured lenders and 20 percent of the principal owed to lenders with unsecured exposure. RFL utilized resources from its balance sheet and received assistance from REL, with REL depositing Rs 220 crore on behalf of RFL against the one-time settlement.
Looking ahead, RFL aims to seek the removal of the corrective action plan once it settles the remaining debt. Ind-Ra highlights that the company aims to revitalize its business by utilizing current collections and maintaining a focus on offering secured and unsecured loans to micro, small, and medium enterprises. This strategy aims to foster the growth of a strong loan portfolio.
In alignment with its growth strategy, RFL is divesting 87.5 percent of its subsidiary, RHDFC, to its parent company, REL. This strategic move will enable RFL to concentrate its efforts on enhancing and expanding its loan book.
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