 "Shachindra Nath")
Shachindra Nath, group chief executive of Religare Enterprises Ltd (REL), has closed a big deal, estimated to be around Rs 1,000 crore, by selling the company's stake in a life insurance joint venture with Aegon. He tells N Sundaresha Subramanian how the relationship with Aegon was cordial despite an aborted mutual fund (MF) venture. Excerpts:
What is the rationale for your exit from the life insurance venture at this juncture, when Religare has aggressively pursued growth in the financial services space over the past few years?
Our decision to exit the life insurance joint venture (Aegon Religare Life Insurance) has been a well thought-through one. It is not something new. After a strategic review of this business, we had decided to exit last September. Last week, we formally concluded a definitive agreement with BCCL (Bennett, Coleman and Company Limited), which decided to acquire our 44 per cent share in the venture.
Did Religare's exit from the mutual fund joint venture in 2008 weigh on its relationship with Aegon and affect the growth of the life insurance business?
No, we have always enjoyed most cordial relations with Aegon. Our exit from the mutual fund joint venture in 2008, if you recall, was not on a discordant note, but the result of our desire to pursue independent strategic paths. Though we had been licensed to operate an AMC (asset management company), with Aegon as our equal partner, we hadn't commenced business as we were awaiting final approvals to launch. It is then that an opportunity came to Religare directly to acquire Lotus India MF, which we decided to pursue and Aegon wasn't keen on. Hence, we mutually decided to exit the joint venture. The Lotus acquisition gave us a very good launch pad to jumpstart our India MF play and, since then, the business continues to flourish.
Can you share any valuation details of this deal?
No, we can't share any specific numbers on this, since it is subject to necessary clearances from the fair trade watchdog Competition Commission India, foreign investment promotion board and Insurance Regulatory and Development Authority.
Will you be looking at a fresh entry into the life insurance business, with a new partner?
At this point, no. However, we remain fully committed to our stand-alone health insurance play, Religare Health Insurance, which is shaping up quite well as a provider of customised and innovative health insurance plans for retail and corporations, insuring about 2.5 million lives.
Will there be any human resources' issues due to the exit? Is anybody coming back to the parent firm after the move?
No, Aegon Religare Life Insurance has always operated independently as a business. Given that the strategic intent of Religare's exit was announced in September 2014, the business had sufficient time to adjust.
What is the business outlook for other segments in which Religare is present in?
Our portfolio is built and focused across the 4 core pillars of small and medium-sized enterprises (SMEs)'s finance; capital markets and wealth; health insurance; and asset management. Through our businesses, we touch four million lives across India, catering to almost every target segment from mass retail, high net worth individuals, mid-sized companies to large institutions. As a group, we also have a meaningful foreign presence through our capital markets and global asset management businesses.
In SME finance, we operated through Religare Finvest. Close to 90 per cent of our book, which is approximately Rs 13,000 crore, remains secure with NPAs (non-performing assets) of 2.5 per cent. Given the huge funding gap in this space and the surge in entrepreneurship in the country, this category remains attractive and there is a strong relevance for NBFCs (non-banking financial companies) like us to be active catalysts.
Our capital markets and wealth play is divided across three sub segments - the retail piece operated through Religare Securities , wealth management is operated through Religare Private Wealth and the institutional equities and investment banking platform. As the markets continue to surge triggered by positive sentiments and improving macros, there is a clear relevance and need for efficient service delivery across these segments backed by technology and smart cost structures.
Religare has plans for fresh capital raising. Which are the areas you are looking to deploy this?
As a large and diversified financial services platform, we as a group will be capital-hungry and each of our businesses are in their respective stages of evolution. All of these would be requiring growth capital to scale up to their next level in their respective growth journeys.
There have been reports of Religare being in talks with private equity players for stake dilution. Are these real?
News reports on this have been largely speculative and presumptuous. We're running a process for capital raising following an approval from the REL board last July (2014) to do so and it is nothing more than that.
