Mumbai-based U GRO Capital likely to buy Religare Finvest for Rs 400 crore – ET BFSI


MUMBAI: Mumbai-based U GRO Capital, founded by industry veteran Shachindra Nath is likely to buy Religare Finvest for about Rs 400 crore, according to sources. U GRO Capital has signed a binding term-sheet and the deal is likely to be sent to Reserve Bank of India (RBI) for its approval, said people aware of the development.Earlier this year Reserve Bank of India (RBI) rejected a proposal by TCG Capital to acquire Religare Enterprises’ arm and told the company to find another suitor.

The sale was a part of the company’s debt resolution process. Religare Enterprise was originally promoted by Malvinder and Shivinder Singh who subsequently lost control of the firm. Several banks which were lenders to Religare had said the deal would be concluded before the end of the current fiscal.

Sources say that the deal is subject approval from lenders and regulators. Religare did not respond to an email query from ET while U GRO denied any such development. “The information is incorrect and we deny it completely,” said U GRO spokesperson.U GRO Capital, a technology-enabled small business lending platform set up by former Religare Finance chief executive Shachindra Nath was one of the four front runners to acquire RFL. Other bidders, which expressed their interest include global and domestic investors such US PE firm Lone Star, India Resurgence Fund (India RF), which is a joint venture between Piramal Enterprises and global private equity player Bain Capital, according to sources.

Nath, who quit as group chief executive officer at Religare Enterprises in 2016, founded U GRO after acquiring a listed NBFC and providing business loans.

Currently RFL’s total loan book is Rs 5,300 as on March 31, 2020 and SME book constituted 52% of total book or Rs 2,775 crore. Post RBI’s rejection of TCG group’s proposal to acquire RFL, in April 2020 RFL submitted a revised Debt Resolution Plan (DRP) to its lenders for restructuring of its current debt of Rs 4,600 crore.

Investment Banking sources familiar with the transaction said that the terms of the bid are attractive that the earlier bid put forth by Purnendu Chatterjee-led The Chatterjee Group (TCG) on the grounds of not meeting the “fit and proper” criteria.

Religare’s NBFC arm has been facing headwinds after allegations of siphoning off funds by erstwhile promoters Singh brothers impacting the prospects company’s lending business significantly.Erstwhile Promoters (Singh Brothers), which hold less than 1% equity shareholding (0.88) are expected to be de-classified as ‘Promoter’ in the next few weeks. After the exit of ‘Singh Brothers’ from REL Board in February 2018, the shareholders (led by existing institutional shareholders and new shareholders) established an Independent Board towards supervision and governance.

The alleged misappropriations of funds by erstwhile promoters and their associates resulted in RBI placing RFL under Corrective Action Plan in January 2018.

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