Category: Banking & Finance

Religare Enterprises to infuse ₹411-crore capital into NBFC arm Religare Finvest

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Religare Enterprises Limited (REL), which is on a turnaround, proposes to invest as much as ₹411-crore capital into its NBFC arm Religare Finvest Ltd (RFL), its Executive Chairperson Rashmi Saluja has said.

The funding for this capital infusion into RFL will come out of the latest ₹570-crore fund raise that REL Board approved on Tuesday via preferential issue to existing and marquee investors.

Nearly 80 per cent of REL’s planned ₹570-crore capital mop-up will come from existing investors. Burman family is investing ₹175 crore, taking the family’s shareholding in REL to 14.5 per cent from 11 per cent now. Ares SSG Capital, a global fund and another existing shareholder in REL, is pumping in ₹75 crore in the preferential issue, taking its shareholding from 6.8 per cent to 8 per cent.

Preferential allotment

Under the preferential allotment, as many as 5,41,56,761 equity shares of REL will be issued at price of ₹105.25/share, which is almost a 28 per cent discount compared to Tuesday’s close of ₹146.5 in the stock markets. On Wednesday, REL shares closed on the NSE at ₹135.55, down nearly 8 per cent over the previous close.

Asked if Burman family or Ares SSG Capital have made any formal requests for a Board seat in the wake of the proposed increase in their shareholding in REL, Saluja replied in the negative. She however maintained that REL was not averse to this and could look at it if there is interest on the part of the investors.

Meanwhile, Saluja said the remaining ₹160 crore out of the ₹570-crore fund raise would be infused in REL’s Housing Finance and stock Broking arms.

She also expressed confidence that REL will be able to soon recover the fixed deposit of ₹750 crore parked with Lakshmi Vikas Bank (now DBS Bank). Religare Finvest had a 2018 pending suit against LVB alleging misappropriation of its fixed deposits of ₹750 crore.

“We are very hopeful this FD money is going to come back to us soon. This will be another boost to REL besides the debt restructuring of RFL that has already been proposed and expected to be completed in next few months,” Saluja told BusinessLine.

She also said that REL will look to take Care Health Insurance public through an IPO although no timeline has been decided by the Board.

REL is the holding company for four key businesses i.e. SME Finance via Religare Finvest Limited (RFL), Health Insurance via Care Health Insurance Limited (CHIL), Retail Broking via Religare Broking Limited (RBL) and Affordable Housing via Religare Housing Development Finance Corporation Limited.

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LIC Chairman’s tenure extended to March 2022

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The Appointments Committee of the Cabinet (ACC) has extended the term of Life Insurance Corporation (LIC) Chairman MR Kumar till March 13, 2022, the date he completes three years as the chief of the insurance behemoth.

Mega IPO

His currently notified term was to end on June 30 this year. The extension was widely expected, given that LIC is readying itself for a mega initial public offering (IPO), which is expected to help the government mop up close to ₹1-lakh crore in 2021-22.

It maybe recalled that Kumar was appointed as LIC Chairman on March 13, 2019. Kumar had joined LIC in 1983 as a direct recruit officer. In a career spanning nearly four decades, Kumar has headed three zones of LIC – Southern Zone, North Central Zone and Northern Zone.

The government had recently amended rules to specify that only Managing Directors of LIC will be eligible to appear for interviews to the post of LIC Chairman.

The Centre owns 100 per cent of LIC. It is looking to divest up to 10 per cent stake in the proposed IPO. Once listed, LIC will become the country’s largest company by market capitalisation, say capital market observers.

Bigger than Reliance Ind

LIC could get a value of $261 billion when listed, based on its assets under management and using private sector insurers, analysts at Jeffries India, led by Prakhar Sharma, had written in a note in February. That could make it bigger than Reliance Industries, which is India’s largest listed entity.

The government is widely expected to invite merchant bankers for the share-sale this month.

The government has already introduced amendments to the LIC Act to make it IPO-ready. Besides increasing the authorised capital of LIC to ₹25,000 crore from ₹100 crore to facilitate listing, there has been changes in the law to reserve a portion of IPO to existing policyholders.

In the just-concluded financial year FY21, LIC had recorded new business premium of ₹1.84-lakh crore, the highest ever in the history of the corporation.

LIC has been steadily losing market share to private players even as it had built a strong brand over the years. It has been reporting low shareholder profits as most of the profit is redistributed to policyholders and dividend payouts to the government are also high.

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Despite the turmoil, DHFL buy is an opportunity for Piramal Group

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Mortgage financier Dewan Housing Finance Corporation Ltd (DHFL) has been in troubled waters for over 18 months now with its financial position seeing a significant decline but it is expected to help Piramal Enterprises Ltd scale up its consumer lending business.

In the fourth quarter of 2020-21, DHFL was back in the black with a net profit of ₹96.75 crore. However, this was largely because it had not made provisions for interest on borrowing.

Losses widen

For the full fiscal 2020-21, its net losses widened to ₹15,051.17 crore from a net loss of ₹13,455.81 crore in 2019-20. Total revenue from operations or net sales fell 8.2 per cent to ₹8,770.65 crore in 2020-21 from ₹9,557.96 crore in 2019-20.

But compared to peers such as GIC Housing and SRG Housing Finance, DHFL’s net sales are still high.

Its total assets fell sharply by 18.3 per cent on an annual basis to ₹70,358.66 crore last fiscal and it had a negative net worth of ₹20,645.31 crore.

“In an IBC process, the quarterly profit and loss is not important. The asset side of the book is being bought and the liability side gets extinguished,” said an expert, who did not wish to be named.

“DHFL is a good buy. It continues to do well and the quality of its book is still fine despite all the turmoil,” he further said.

According to sources, PEL is hoping that the implementation of the resolution will be completed by August.

The main attraction of DHFL for the Piramal Group is the scale of its operations and branch network, which the latter hopes to use to build its retail lending book.

The mortgage financier also has close to 10 lakh customers. According to its annual report 2019-20, it was present in 305 locations in the country. PEL has a financial services business, which registered net sales of ₹7,033 crore last fiscal. Of this, PCHFL provides end-to-end financing solutions in both wholesale and retail funding across sectors.

As part of the resolution plan, DHFL shares will be de-listed after the acquisition. PCHFL would be merged with DHFL.

PEL has also launched a retail financing platform in November 2020, which offers seven products.

Lending book

“The overall lending book is at about ₹45,000 crore, of which ₹5,000 crore or 11 per cent is from retail. DHFL book has a substantial retail portion as well,” Jairam Sridharan, CEO, Piramal Retail Finance, had said in April, adding that in the medium term, it plans to grow the retail book to about two-thirds of the financial services business.

A recent note by ICICI Securities, after PEL’s annual results, had said that the group’s core objective is to transform into a well-diversified lending entity with share of retail rising to 50 per cent. “This will primarily be driven by organic build-up of retail lending, completion of DHFL acquisition, and rationalising wholesale lending and making it more granular,” it had said.

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European banks ready payments system to rival Visa, Mastercard, BigTech, BFSI News, ET BFSI

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A few large European lenders have teamed up to create a new European payment system, to compete with the US and Chinese systems and protect sovereignty in an important area of consequence.

The European Payments Initiative (EPI), previously known as the Pan-European Payments System Initiative (PEPSI), is a European Central Bank-backed payment-integration initiative aiming to create a pan-European payment system and interbank network to rival Mastercard and Visa, and eventually replace national European payment schemes such as France’s Carte Bancaire and Germany’s Girocard.

It is supported by the European Commission, and currently comprises 30 major European banks (including all the major French banks, Deutsche Bank and Commerzbank in Germany, Santander Bank in Spain and Intesa Sanpaolo and UniCredit in Italy.

It is tasked with creating a pan-European payments service that can be used to pay online as well as in stores, to settle bills between individual consumers and to withdraw cash at ATMs.

The rationale

EPI is born out of the need to protect the sovereignty and break a US-dominated “oligopoly” on payments.

In July 2020, a group of 16 major European banks from five euro countries announced the launch of the EPI with the aim to create a unified payment solution for consumers and merchants across Europe.

The realisation that a US president on any given day could decree Mastercard or Visa should no longer do business with a certain part of the population has prompted the initiative.

Europe’s banks are considering their own interests, aware that if they do not act now they could be challenged by tech companies such as Apple and Google, which are increasingly preying on their turf.

Today, four in five transactions in Europe are handled by Mastercard and Visa, according to EuroCommerce, a lobby group of European retailers.

While on the other side of the table, the banks and acquirers driving EPI process more than half of all EU payments.

The critical mass of business brought by banks such as Deutsche, BNP Paribas, ING, UniCredit and Santander give the EPI weight. The Brussels-based entity has until September to draw up a blueprint. If the banks behind EPI then give the green light, the first real-world applications could be launched in early 2022.

The hurdles

For a system to work, merchants should be ready to accept payments and users ready to make payments. . Having both in place at the same time is not an easy task, particularly since the full rollout could take years, and a bad start could kill EPI’s chances of success.

EPI’s backers have forked out €30 million to fund the initial development of a blueprint, but short of the “billions of euros” that are necessary. . One way to defray the costs could be to tap EU funds.



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Health insurers may not go in for premium hike

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A hike in health insurance premium may not be on the cards, at least for now, with the Insurance Regulatory and Development Authority of India (IRDAI) not in favour of such a move at present.

“With claims and losses mounting, some insurers were looking at the possibility of revising premium on health insurance this year. However, the IRDAI is not keen on a rate hike in the middle of a pandemic,” said the CEO of an insurance company, adding that the focus now is to clear claims.

The IRDAI has been closely the monitoring the settlement of health insurance claims in the wake of the pandemic to ensure that it is done speedily by insurers. “As of now, there has not been any increase in premium rates for health insurance this fiscal. A number of insurers had hiked rates last year and some were considering doing so this year,” said another industry expert.

Revision in premium

Many insurers had revised premium by about 10 per cent to 15 per cent last year after meeting IRDAI norms for standardisation of exclusions. However, with the rising Covid claims and faced with underwriting losses, some of them were looking at a fresh round of increase in premium.

Non-life insurers have been facing a surge in Covid-related health insurance claims since the last one year. While it had abated in between, claims rose to a much higher level during the second wave of the pandemic. Insurers have received over ₹23,000 crore of Covid-related claims till date.

A recent report by ICRA also noted that underwriting losses for general insurers are set to rise.

Sahil Udani, Assistant Vice-President and Sector head – Financial Sector Ratings, ICRA, said: “We expect a seven per cent to nine per cent growth in GDPI in 2021-22, supported by growth in health segment and uptick in motor segment.

“Despite underwriting losses, the sector is expected to report marginal return on equity (3 per cent to 4.5 per cent), largely supported by investment income.”

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Karix Mobile deploys WhatsApp Business solution for Axis Bank

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Karix Mobile, a wholly-owned subsidiary of Tanla Platforms, has deployed a conversational banking solution- WhatsApp Business- for Axis Bank.

Using the solution, Axis Bank customers can now start a WhatsApp chat with the bank to conduct frequent banking activities on-the-go. A gamut of financial services – both transactional and informational – such as checking account balance, checking of credit card bill amount, knowing nearest branch or ATM location and the like can be availed by customers through this solution.

“From digitising the account opening process to serving the customer throughout the lifecycle with omnichannel communication, our obsession with improving customer experience has led to some path breaking innovations in the cloud communications space for the banking industry,” Deepak Goyal, Chief Business Officer, Tanla Platforms Limited, said in a release.

Customers can get started with WhatsApp banking with ease either by giving a missed call, sending an SMS or subscribing to receive WhatsApp messages via the numbers provided on the bank website.

All communication on the WhatsApp account is encrypted end-to-end and all sensitive information is `safe and secure’ the release added.

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Reliance Home Finance debt resolution: Voting likely to be completed by June 15

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The debt resolution of Reliance Home Finance is understood to be in the final stages, with voting on the bids likely to be completed over the next few days.

“The voting for the debt resolution of Reliance Home Finance started on May 31 and is likely to be completed by June 15. The winning bidder will be selected from among the four final and binding bids received by the lenders,” said a person familiar with the development.

The four final bidders include ARES SSG along with Assets Care and Reconstruction Enterprise, Authum Infrastructure and Investment, Avenue Capital along with ARCIL and Capri Global Capital.

In its fourth-quarter results announced last month, it had said the debt resolution process is in the final stages. It had reported a net loss of ₹444.62 crore in the fourth quarter ended March 31 as against a net loss of ₹238.37 crore in the same quarter of the previous fiscal year.

Reliance Home Finance is a subsidiary of Anil Ambani controlled Reliance Capital. Its ₹11,200 crore debt resolution is expected to help Reliance Capital.

Bank of Baroda is the lead banker under the Inter Creditor Agreement to resolve debt-ridden Reliance Home Finance. The lenders had in August last year proceeded with the resolution plan and had sought bids for the two companies.

Its total financial indebtedness stands at ₹13,312.96 crore, according to a recent regulatory filing. The total amount of outstanding borrowings from banks and financial institutions amounts to ₹4,435.08 crore.

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LIC Chairman’s term extended to March 13, 2022

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The government has extended the term of Life Insurance Corporation of India Chairman, M.R. Kumar, by nine months until March next year. Kumar’s term was set to end on June 30.

“The Appointments Committee of the Cabinet has approved the proposal of the Department of Financial Services for extension of the term of MR Kumar as Chairman LIC beyond his currently notified term, which expires on June 30, 2021, till March 13, 2022, that is the date he completes three years as the Chairman, or until further orders, whichever is earlier,” said an order of the Appointments Committee of Cabinet.

Kumar’s extension comes amidst the government planning to launch LIC’s initial public offering this fiscal.

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Top rupee-bond banker says time for Indian firms to issue, BFSI News, ET BFSI

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Indian companies should use the current yields which are at multi-year lows to raise long-term funding, according to the nation’s biggest rupee bond arranger since 2007.

“The market levels are absolutely fantastic, absolute yields are quite low at multi-year lows, spreads are quite tight,” Neeraj Gambhir, group executive and head – treasury, markets and wholesale banking products at Axis Bank Ltd., said in an interview with Bloomberg Television. “Our suggestion to borrowers is that current market scenario is very good and if they need long-term funding they should be accessing the markets.”

Companies borrowed an unprecedented 9.8 trillion rupees ($134.4 billion) through domestic bonds in the fiscal year ended March as they build up cash buffers to tide over the pandemic. The average yield on top-rated two-year rupee corporate notes fell 15 basis points on Tuesday to 4.63 per cent, the biggest decline since May 17. Notes touched a record low of 3.84 per cent in April.

India’s central bank will probably need to buy 3-4 trillion rupees of sovereign bonds this fiscal year to support the government’s borrowing program, Gambhir said. He expects the benchmark 10-year yield to remain near the 6 per cent mark in the ‘foreseeable future.’

The rupee is likely to remain around current levels and unlikely to depreciate immediately, Gambhir said.

“The strength of the rupee is reflective of the dollar weakness particularly against EM currencies and I don’t expect it to reverse in a meaningful way anytime in the near term,” he said.

The rupee was trading down 0.2 per cent to 73 a dollar on Wednesday.



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