Ind-Ra: Religare Enterprises Dependent on External Inflows for Immediate Payouts

Religare Enterprise Limited (REL; 'IND AA-'/Stable) is likely to meet its immediate debt repayment (including interest) of INR1.55 billion on 30 June 2017 through external flows, due to temporary insufficient cash on its own book, says India Ratings and Research (Ind-Ra). REL may raise short-term bank loans or commercial papers to meet the immediate payouts.

In April 2017, REL had announced a stake sale in its health insurance subsidiary. The company expects to receive sale consideration in the near to medium term (post the necessary regulatory approvals), which would provide comfort to the liquidity situation. As a holding company, REL has depended upon cash receipts in the form of dividends from the key operating subsidiary, Religare Finvest Limited (RFL; 'IND AA-'/Stable) as well as interest income from loans and advances. However, RFL was unable to provide dividends to REL in FY17 due to higher credit write-offs.

During FY16 and FY17, REL had sold off and realised purchase consideration from the sale of its stakes in various key businesses such as life insurance business, domestic asset management company and global asset management company. The company has significantly brought down its external debt since the last couple of years by utilising the money raised from the sale of businesses. The lower external debt outstanding (forms just 18% of total debt) provides REL with the buffer to raise additional debt. REL has access to sufficient liquidity buffers available with operating group companies - RFL and its subsidiary Religare Housing Development Finance Corporation Limited ('IND AA-'/Stable) in the form of cash, liquid investments and unutilised sanctioned bank lines.

REL's ratings are driven by support from its key operating subsidiary, RFL. Post the one-off credit losses in RFL, REL had infused equity into RFL which strengthened RFL's equity buffers. Ind-Ra expects RFL to resume payment of dividends to REL from FY18, which would keep the rating linkages intact. That being said, Religare group is in the restructuring mode. This involves selling off stakes in businesses and announcements relating to the merger of certain subsidiaries into REL. This would simplify the corporate structure and knock-off the inter-group liabilities. It would lead to a decline in REL's double leverage with significant reduction in debt from subsidiaries (82% of REL's debt).

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