Religare Chairman, Director Resign As Lending Arm Faces RBI Scrutiny

Religare Enterprises Ltd.’s executive chairman S Lakshminarayanan and independent director Kishori Udeshi have decided to quit barely two months into the job as the central bank raised questions about some borrowers of its non-bank lending arm, two people aware of the development told BloombergQuint.

The two have submitted their resignations and await the Reserve Bank of India’s approval, the people quoted above said. Lakshminarayanan, a former bureaucrat, and Udeshi, a former deputy governor of the RBI, didn’t respond to BloombergQuint’s phone calls. They had joined Religare Enterprises in November.

The company is yet to disclose the resignations to stock exchanges. As per RBI norms, any change on the board of an entity involved in the financial services business has to be cleared by the central bank. The board will discuss any such resignations after the RBI approval, a Religare Enterprises spokesperson said in an emailed response to BloombergQuint without confirming if Lakshminarayanan and Udeshi had put in their papers.

The company’s non-bank financial services arm Religare Finvest Ltd. was under the central bank’s scrutiny over the creditworthiness of some of its borrowers, PricewaterhouseCoopers had said in the audited earnings report in July last year. The auditor said the RBI, in a January 2017 letter, had asked the company to reduce its corporate loan book. It stood at Rs 2,272 crore as of September.

The company converted commercial papers held by some of the stressed group entities into corporate loans, ICRA said in its December note. That increased the size of the corporate loan portfolio.

The RBI, in a second letter, asked the company to respond with details of the corporate loan book by Jan. 10, the people quoted above said. Religare Enterprises is engaging closely with the central bank, its spokesperson said, confirming that the company had received a communication from the regulator.

The RBI also directed the management to not use proceeds from the sale of any business without its permission, said one of the people cited above. Religare Enterprises is selling its securities business to Edelweiss Group and health insurance arm to a consortium of investors led by private equity firm True North.

The central bank also sought information about the foreign strategic investor which Religare Enterprises said will buy its financial services business, said one of the people cited above.

The subsidiary, Religare Finvest, reported a loss of Rs 341 crore for the year ended March 2017. Its total managed portfolio reduced to Rs 12,428 crore as on Sep. 30 from Rs 14,416 crore as of March-end.

Exodus

Lakshminarayanan and Udeshi’s resignations, if accepted, would be the latest in a series of exits by top executives and board members at Religare Enterprises in the last few months.

Sunil Godhwani resigned as a whole-time director and chief executive officer in September. In November, Rashi Dhar and Avinash Chander Mahajan resigned from the board as independent directors; Anil Saxena stepped down as the chief financial officer; and Mohit Maheshwari resigned as the company secretary and compliance officer.