IFC checks out of Religare as battle for control rages

Religare is in the midst of a takeover battle (Pradeep Gaur/Mint)
Religare is in the midst of a takeover battle (Pradeep Gaur/Mint)

Summary

  • World Bank's finance arm has sold its 2.92% stake in the financial services company

Mumbai/Bengaluru: The International Finance Corporation has sold its entire residual stake in Religare Enterprises Ltd, ending its 12-year engagement with the Delhi-based financial services company, even as the management of Religare and the Burman family continue to battle it out for control of the company.

IFC, the private finance arm of the World Bank, sold its 2.42% stake between 29 January and 2 February, according to a public markets disclosure made by Religare.

Mint could not independently ascertain the buyer of the shares. Still, IFC’s stake sale coincides with a disclosure made by the Burmans on 31 January that it had bought a 4% stake in Religare to take its total ownership in the company to 25.18%.

“In all probability, IFC sold its stake to Burmans as the Burman family has been looking to buy shares from large investors who are looking to exit," an investor in Religare said on condition of anonymity.

The volume-weighted average price (VWAP) of Religare was 232.84 a share when the shares were sold, implying IFC earned 186 crore.

“This seems like a portfolio call taken by IFC. It is an opportune time to exit as the stock has been doing well lately," said a senior executive at a proxy advisory firm, also requesting anonymity.

Email queries sent to a spokesperson of the Burman family, and to IFC and Religare seeking comment went unanswered till press time.

Significantly, IFC, which had a 3.9% stake at the end of 30 September 2023, had sold 1.42% in October-December as well. The VWAP of Religare at that time was 225.9 a share, translating to IFC earning 110 crore. Up until then, IFC did not sell any shares and its ownership had declined on account of the company issuing new shares.

In 2012, IFC first invested $75 million to buy 1,000 compulsorily convertible debentures, which converted into nearly 8% ownership in the company in the April-June quarter of 2014.

IFC’s divestment comes at a time when Religare’s board, led by chairperson Rashmi Saluja, is trying to stall the Burmans from taking control of Religare, which does not count any identifiable promoter following the exit of brothers Malvinder and Shivinder Singh.

The Burman family owns shares in Religare Enterprises through MB Finmart, Puran Associates, VIC Enterprises, and Milky Investment and Trading Co., entities belonging to cousins Anand and Mohit Burman.

Last September, the Burman family announced an open offer to buy an additional 26% stake. For now, the open offer is still to be approved by the Securities and Exchange Board of India, Reserve Bank of India, and Insurance Regulatory and Development Authority of India.

This is because both Saluja and the Burman have hurled accusations of poor corporate governance at each other. The Religare board contends that the Burmans are unsuitable to assume control of the financial services company. The Burmans, on the other hand, have accused Saluja of engaging in insider trading and abusing power to secure excessive remuneration.

Both parties deny each other’s allegations.

IFC owns equity in 12 listed companies, including Ujjivan Financial Services, Federal Bank, Deepak Fertilisers & Petrochemicals Corporation, and Craftsman Automation.

Additionally, IFC also owns stakes in many privately held firms, including online pharmacy Tata 1mg, embattled education technology firm Byju's, and Moglix, a business-to-business e-commerce firm.

Religare stock closed down 2% at 218.55 on the BSE on Monday.

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