Religare Enterprises: Share Analysis

Date: 10 Oct 2023

Religare Enterprises Ltd (REL) has undertaken a major debt restructuring exercise along with revamping the board in FY19. The erstwhile promoters were replaced by appointing Mrs. Rashmi Saluja (existing board member) to the helm of affairs. In addition, REL undertook a one-time settlement of INR 2,198 cr in Mar 2023 (including NCD settlement of INR 20 cr) with 16 of the 17 lenders of its SME lending subsidiary Religare Finvest Ltd (RFL) as total clearance of latter’s dues (INR 6,064 cr) and exited the Corrective Action Plan (CAP) imposed by RBI. During the entire gruesome period, FY18-23 its other businesses of broking (under Religare Broking Ltd – RBL), and affordable housing finance (under Religare Housing Development Finance Corp Ltd (RHDFCL), stepdown subsidiary of RFL) were impacted imploding business performances.

However, the health insurance business (Care Health Insurance Ltd – CHIL) continued to flourish given the tailwinds associated with the sector and full backing of REL to ensure that at least one growth engine was sustained while the others were getting restructured. The proof of the pudding lies in the fact that despite the negative sentiments and the financial stress, REL injected growth capital of INR 192 cr (in FY23) along with external investors (INR 350 cr by Kedara Capital in 2 tranches during FY21-23). This ensured that today CHIL is the 2nd largest SAHI player (8th largest in the health insurance category) and consistently profitable since FY19.

The fact that the worst is behind, and the existing verticals of SME lending, broking and affordable housing have strong tailwinds with little requirement for fresh capital should enable REL to rediscover its mojo and begin afresh its growth journey. The Burmans (of Dabur India Ltd) having acquired a substantial stake (21%, through subsidiaries) and made an open offer to acquire a further 26% at an offer price of INR 235 per share. This will ensure that henceforth a strong promoter group will be at the helm of affairs along with a proven management. This augurs very well for the future growth story and could be a trigger for the “rerating” of the stock.

We initiate coverage on REL at the CMP of INR 236 per share (2.1X FY26 P/B) with a SOTP based price target of INR 471 per share (4.1X FY26 P/B), representing an upside potential of 99.6% over the next 24 months.