Her back against the wall, Rashmi Saluja, executive chairperson of Religare Enterprises, is determined to keep up the good fight even as the financial services company, bruised by various regulatory actions and strictures, fends off of a hostile takeover bid.
“In the time that I am here, I am going to be protecting the businesses. I am going to ensure that the business grows better, because I don’t know whether the proposed acquirers have a plan,” Saluja says. She points out that the takeover bid, by the Dabur group’s Burman family, has created uncertainty over the continuance of the current management.
Her plans include a potential listing of group companies Religare Broking and Care Health Insurance within two years; and securing regulatory approval to restart lending from the non-banking financial company (NBFC) Religare Finvest, including offering more loans in the affordable housing segment.
The fightback
When the Burman family, which had started accumulating Religare shares since 2018, raised its stake beyond 26 per cent in September last year, it triggered the takeover code. It then made an open offer to acquire an additional 26 per cent stake for ₹2,116 crore, at ₹235 apiece.
However, this was not going to be a simple takeover. Firstly, the Religare board objected to the “undervaluation”. Next, it deemed the Burman family not ‘fit and proper’ to gain control, even as independent directors of Religare wrote to regulators with allegations of fraud against the family.
The open offer from the Burmans requires Religare to seek approval from regulators such as the Reserve Bank of India, the Securities and Exchange Board of India, and the Insurance Regulatory and Development Authority of India. The Religare board, however, dragged its feet for months until SEBI sent a show cause notice, directing it to apply for the regulatory clearance or face debarment from the securities market.
The company appealed against SEBI’s notice, but the Securities Appellate Tribunal directed it to apply for the regulatory clearance. The next hearing on the matter is set for August 29 even as the company stated it would apply for the approvals.
Continuity matters
Saluja says the primary objection to the takeover bid is that it smacks of distrust in the management, especially given that the employees have worked hard to take the company to its present level. “I never thought there would be an open offer… or that it would actually dedicatedly serve the ouster of the management,” she says.
She clarifies that she is not against the open offer per se, but what it represents in terms of creating management uncertainty. She accuses the Burmans of waiting until the current management had cleaned up the mess left by the erstwhile promoters and then moving in for the kill.
The open offer did not come with a business plan, nor did it state how it will affect the current management, nor was there any appreciation for the efforts that had gone into building the company to its present state, she contends.
Growth plans
As the battle rages for the control of the ₹6,200-crore Religare group, the management is sticking to its growth plans for the major verticals.
After weak financial metrics pushed Religare Finvest to attempt corrective action in 2018, the NBFC now awaits RBI nod to restart lending.
Meanwhile it has repaid its lenders under a one-time settlement plan and is currently debt-free. Chief Executive Pankaj Sharma says the NBFC’s financial ratios are healthy and it boasts a net worth of over ₹750 crore.
“We are receiving support from the lead bank and other banks in the consortium. Everything is falling in place for RFL and, based on that, we are confident that the RBI should give the go-ahead,” Sharma says.
The banking regulator had scrutinised the NBFC’s business plan a couple of times over the last 6-7 months. The company has enough cash for the next 12-18 months, Sharma says.
The NBFC lends to small and micro enterprises, and aims to expand its customer base after its comeback.
In the affordable housing segment, its average loan size is ₹10 lakh. Disbursals have so far been supported by parent Religare Enterprises and internal collections, and this year it plans to tap the debt route to increase disbursements multi-fold. Its loan book now stands at ₹270 crore.
The group’s Care Health Insurance is the second biggest standalone private health insurer in India, clocking 35 per cent growth — nearly twice the industry standard — over the last four years, Strategy and M&A head Pratul Gupta says.
In FY24 it reported net profit of over ₹400 crore and gross premium collection of ₹7,000 crore.
Private equity firm Kedaara Capital has a 16 per cent stake in the insurance company, acquired in 2020, and has reportedly reaffirmed confidence in the current management.
Religare Broking, meanwhile, plans to offer wealth management services as a natural progression of its business, and even asset management services in the foreseeable future.
Apart from broking services, the company runs Religare Digital Solutions, a unit that leverages technology to deliver financial inclusion products.