Religare Enterprises Ltd Management Discussions.


Macroeconomic Developments Growth of Indian Economy

The Indian economy grew at 4.2% in Financial Year 2019-20 (FY20), significantly lower than the 6.1% registered in Financial Year 2018-19 (FY19), due to general slowdown in demand witnessed from the start of the financial year and COVID-19 pandemic further adversely impacted the economic activity in the last month of the fiscal year. The full-year GDP growth is the lowest that India has registered in 11 years. There were nascent signs of acceleration of growth in India before the pandemic hit in March and consequently the GDP grew at 3.1% in the last quarter as against 5.7% in the corresponding period, last year.

FY 2017 FY 2018 FY 2019 FY 2020
GDP Growth 8.3% 7.0% 6.1% 4.2%
GVA Growth 8.0% 6.6% 6.0% 3.9%

Source: Government of India, CSO. As per revised and provisional estimate available

For the full year, data from the Central Statistics Office showed that while agriculture grew at 4% but manufacturing growth was stagnant at 0.03%. Growth in private final consumption decelerated to 5.3% from 7.2% a year ago, while government final consumption grew at 11.8 % as against 10.1 % in the previous year.

Gross fixed capital formation, a key measure of investment demand in the economy, contracted by 2.1% in 2019-20. Exports and imports also contracted by 3.6% and 6.8% respectively. Nominal GDP growth for the full year also slowed to 7.2 % as against 11% growth the previous year.

Impact of COVID-19

The unprecedented pandemic crisis of COVID-19 and resultant lockdowns have given a massive shock to economies world over. In India more than 2 months of nationwide lockdowns resulted in massive GDP contraction of 23.9% in first quarter of the Financial Year 2020-21 (FY21). However over the second quarter of FY21 a lot of economic activity has normalized and in many sectors economic activity has reached upto 90% of pre-Covid level. The International Monetary Fund (IMF) has projected that the GDP of the Indian economy would contract by 4.5% in the calendar year 2020. The recovery in the Financial Year 2021-22 (FY22) is expected to be sharp and IMF projects that Indias GDP will grow by 6% in calendar year 2021.

Macroeconomic Outlook

Economic conditions shall remain challenging in FY21, considering the uncertainties with regard to the impact of the global health crisis and the stand-still in economic activity in first quarter of FY21. While systemic liquidity is abundant, the economic weakness caused by the pandemic and its effects on labour market, will impact banking sector loan growth, revenues, margins, asset quality and credit costs. Though the health crisis is far from over, the infection levels have started reducing in India from mid-September 2020. Given, currently in October, a new wave and surge in infections levels is seen in western economies especially in Europe, USA and Russia, it is early to predict that pandemic has reasonably peaked out in India also. Hence it is safe to assume that overall economic activity will fully pick up to pre-Covid levels by the end of FY21. Due to the impact of pandemic, consumer and economic slowdown is visible but the severity and timespan of the downturn will depend on the spread of COVID 19, continued policies responses to the crisis, adaption & innovation of corporate sector and also on the effective deployment of an effective vaccine for COVID-19. While various vaccines are in final stages of testing, the world is eagerly awaiting for the announcements of approval of adequately tested, safe and effective vaccines, which may be distributed effectively world over. Economists are hopeful that by the first quarter of FY22, a sharp economic recovery may get started.

Industry Overview- Financial Services

NBFC Sector

Non-Banking Financial Companies (NBFCs) play an important role in promoting inclusive growth in the country, by catering to the diverse financial needs of customers not having access to bank finance. The significance of NBFCs in the Indian financial landscape has increased during the past years, with their combined assets expanding from Rs 14.5 lakh crore as on end March 2014 to above Rs 32 lakh crore by the end of September 2019. NBFCs in

India appear to be substituting for direct lending by banks in the non-urban parts of the Indian economy. In recent years, NBFCs have also been a significant source of credit to the Micro, Small and Medium Enterprises (MSMEs) sector, which accounts for about 29% of Indias GDP. Further, specialized NBFCs have also played an important role in infrastructure development by providing long term financing to this sector.

Banks are a key source of credit for NBFCs. The Reserve Bank of Indias (RBI) regulations providing credit to NBFCs for on-lending to certain specific sectors, eligible for classification as priority sector lending have also incentivized the flow of credit from banks to NBFCs. The reliance of NBFCs on market-based instruments, like Corporate Bonds and Commercial Paper (CPs), to meet their financing needs, has also grown and stands at about 31 % of their total liabilities at at the end of December 2019. Mutual funds, especially debt funds, are one of the major investors in market instruments issued by NBFCs: mutual funds account for 61 % of total outstanding commercial papers issued by NBFCs as by the end of march, 2020.

Post IL&FS, however, market financing conditions for NBFCs became challenging. Action in terms of rating downgrades, intensive investor scrutiny and enhanced regulatory oversight were instrumental in bringing about greater market discipline, with the better rated and better performing companies continuing to have relatively easy access to market financing, while those with asset-liability mismatch (ALM) issues and/or asset quality concerns were subjected to higher borrowing costs (Financial Stability Report, RBI, June 2019).

Initiatives launched by the RBI to support NBFCs

To easy the liquidity and other financial constraints of NFBC sector RBI took the following measures in FY20:

• The RBI increased the exposure limit of banks to a single NBFC to 20% of Tier-I capital from 15%.

• Priority sector classification to loans given by banks to NBFCs for lending to agriculture, MSME and housing to be classified as Priority Sector Lending (PSL).

• Partial Credit Guarantee scheme from Government of India (GOI) created a mechanism hereby GOI will provide partial credit guarantee to banks for the purchase of NBFC assets, amounting to Rs 1 lakh crore during FY20. The guarantee will be on one-time basis for six months for banks first loss of upto 10%.

• The RBI has allowed banks to risk-weight their exposures to NBFCs based on the respective credit rating thereby easy risk-weight in case of exposure to a well rated NBFC.

• The RBI released guidelines on co-origination of loans by banks and non-deposit taking NBFCs in the priority sector. NBFCs must take a minimum exposure of 20% with the remaining contribution by the participating bank.

• RBI guidelines on securitization allowed NBFCs to securitize loans with maturity of more than 5 years.

Despite above measures, the market financing conditions for NBFCs have again become more challenging in recent times due to COVID-19 related disruptions and developments with risk aversion in the mutual fund sector. Further policy interventions may be needed to ensure flow of funds to credit-worthy NBFCs, especially small and medium-sized ones and to minimize systemic risks.

Impact of COVID19 and Lockdown on financial sector

The lockdown has affected the cash flow and liquidity position of many borrowers (individuals, small businesses and corporates), impacting their debt-servicing capabilities. The impact would be more prominent in the case of self-employed borrowers, the daily wage workforce, and small businesses (non-essentials). Non-banks largely cater to the self-employed borrower segment in retail space, where the cash flows are expected to be more volatile in the current situation vis-a-vis their salaried counterparts.

NBFCs, which are already facing funding constraints and an expected increase in delinquencies, are likely to focus more on collections, at least in the near term. Therefore, the lack of supplementary credit funding could have a significant negative impact on these borrowers as their cash flow mismatches would compound with the passage of time. Deterioration in the asset quality could further stifle the fund flow to the sector as bank credit to the sector is already high and funding from other sources like mutual funds (MFs), insurance, foreign institutional investor (Fils), etc., are likely to be quite muted.

Financial sector measures:

In light of COVID 19 uncertainty, the RBIs monetary policy committee refrained from providing any growth projections for the first time in its history, citing the huge uncertainties around the pandemic and its impact on various sectors. To get the economy moving, the Government of India and Reserve Bank of India announced various measures between March 2020 till date, which included policy changes, reforms, relief packages, bank loans, and infrastructure building plans and so on. Following are some key measures taken by The Reserve Bank of India (RBI) in order to provide relief for the ongoing COVID-19 breakout in India:

• Repo Rate & Reverse Repo - From March to August 2020, RBI has cut the repo rate by 115 bps to 4.0% and Reverse Repo rate by 155 bps to 3.35%.

• Loan Moratorium - In a massive relief to all borrowers, the RBI gave a total moratorium option of 6 months for loans outstanding as on March 1,2020. This is applicable to lending by all Commercial Banks including Rural, Small Finance, Co-Op Banks, All India Financial Institutions and NBFCs including housing finance and microfinance institutions.

• CRR - The RBI also reduced the Cash Reserve Ratio (CRR) by 100 bps. This was applicable from March 28, 2020 and immediately injected a liquidity of Rs 1.37 lakh crore in the system.

• LTRO - The RBI also undertook Long Term Repo Operations (LTRO); allowing further liquidity with the banks. The banks however deployed a lot of it in CPs, government and corporate bonds.

• Ease of Working Capital financing - Lenders were allowed to recalculate drawing power by reducing margins and/or by reassessing the working capital cycle for the borrowers. The RBI also specified that such a move would not result in asset classification downgrade.

• Deferment of NSFR - Implementation of Net Stable Funding Ratio (NSFR) norms, directed towards reducing funding risk by requiring banks to fund their activities with sufficiently stable sources of funding, is postponed to October 1,2020. The NSFR was earlier supposed to be implemented by April 1,2020.

• MSF - Marginal Standing Facility (MSF) was also increased to 3% of Statutory Liquidity Ratio (SLR). The measure allowed banking system to avail an additional Rs 1.37 lakh crore of liquidity under the LAF window in times of stress.

Measures undertaken by the RBI may considerably ease the stress in financial market conditions; however there is a need for ensuring flow of credit & liquidity to address the risk aversion in the system. Expectations of economic recovery post COVID-19 related disruptions and adequate provisioning by financial institutions towards deterioration in portfolio credit quality should gradually restore more confidence in financial sector and NBFC sector in particular.


Reliaare Group Structure and Business Model

Religare Enterprises Limited (‘REL or ‘Company) is a Core Investment Company (CIC) registered with the Reserve Bank of India (RBI). REL is also the listed holding company for the subsidiaries conducting diversified financial services businesses of the group. The four key financial services businesses undertaken through its subsidiaries are as following:

Insurance (Health & Travel) - Care Health Insurance Limited (CHIL)

SME Finance NBFC - Religare Finvest Limiited (RFL)

• Housing Finance (Affordable) - Religare Housing Development Finance Corporation Limited (RHDFCL)

• Retail Broking - Religare Broking Limited (RBL)

All these Religare Group (REL & subsidiaries) businesses have independent management teams to conduct their day-to-day operations. REL supports its subsidiaries by providing requisite Growth Capital, Board Oversight & Governance, Brand Equity, Strategic Advisory & Consulting and need based Corporate Services (Legal, Technology, HR, etc.). The Religare Group has access to a wide reach of customers - 1 million+ policy holders in insurance business, 1 million+ broking customers, more than 26k+ customer served through MSME finance & 10k+ customers contacts in affordable housing finance. As on March 31, 2020 Group has overall employee base of more 10,700 professionals servicing diversified set of customers and Group has reach to around 1,000+ locations around India.

Key Developments during FY 2019-20

Capital Raise at REL and Subsidiary Level

Warrant Conversion: During FY20, the Company received primary capital infusion of Rs 161.55 crore due to the conversion of 41,185,419 warrants issued in FY19, to the equity shares of the Company. This capital infusion was also a testimony of investor confidence in the long term growth prospects of the Company. The funds received were primarily utilized to meet external debt repayments or obligations and invested in subsidiaries companies.

Capital Raised by CHIL during FY20: During the FY20, companys subsidiary, CHIL, raised Rs 58.5 crores through a mix of preferential allotment of shares, rights issue and exercise of ESOP options. CHIL allotted 78,69,425 equity shares of Rs 10 each on preferential allotment/ private placement basis to few shareholders at a premium of Rs 24.31/- per equity share; 3,11,14,756 equity shares of Rs 10 each in a Rights Issue to REL and 4,15,000 Equity Shares of Rs 10/- each to ESOP Holder pursuant the exercise of ESOP options

CHIL Stake Sale to Kedaara Capital: REL and its subsidiary, Care Health Insurance Limited (CHIL) entered into the definitive agreement (Share Subscription and Purchase Agreement) on February 06, 2020 with M/s. Kedaara Capital Fund II LLP and M/s. Trishikhar Ventures LLP (jointly referred as ‘Kedaara) for raising primary capital for CHIL and part divestment of RELs stake in CHIL. Pursuant to same, REL has divested part of its investment in CHIL on June 02, 2020 to Kedaara. The total investment made by Kedaara to acquire shares of CHIL is Rs 567.31 crore, which comprises of primary capital infusion of Rs 300 crore in CHIL and Rs 267.31 crore for the purchase of its shares from existing shareholders of CHIL, including purchase of 6.39% stake from the REL against a consideration of Rs 200 crore. Pursuant to these transactions, the shareholding of the Company in CHIL was reduced to 72.02% on a paid up capital basis.

Composite Scheme of Arrangement:

On December 18, 2019, the Board of Directors of the Company approved the draft Scheme of Amalgamation (“Scheme”) that is designed to simplify the Group corporate structure. In terms of the Scheme, four (4) direct/ indirect wholly owned subsidiaries of the Company namely, Religare Comtrade Limited, Religare Insurance Limited, Religare Advisors Limited and Religare Business Solutions Limited are proposed to merge with/into the Company subject to terms and conditions as provided in the Scheme. The Scheme will result in simplification of Group structure, thereby resulting in reduction in multiplicity of legal and regulatory compliances, reduction of costs and pooling of common resources. Further, the earlier Scheme approved by the Board on May 23, 2019 was withdrawn accordingly. The filing of the Scheme with the Honble NCLT is delayed due to lockdown situation on account of COVID-19 pandemic outbreak and will be filed in due course of time.

Termination of SPA for divestment of Lending Business:

The Company entered into a Share Purchase Agreement (SPA) on October 1,2019 with TCG Advisory Services Private Limited (TCG), Religare Finvest Limited (RFL) and Religare Housing Development Finance Corporation Limited (RHDFCL), to divest its entire stake in RFL and RHDFCLtoTCG. The transaction was subject to necessary statutory and regulatory approvals and fulfillment of other Conditions Precedent (CPs). However, RBI vide its letter dated March 20, 2020 addressed to RFL, has informed that the request seeking approval of acquisition of RFL by TCG from REL cannot be acceded to. Consequently the Long Stop Date of SPA i.e. March 20, 2020 expired without satisfaction of all the CPs and hence the aforesaid SPA was terminated.

Settlement with Axis Bank Limited:

Axis Bank filed a legal case in Honble Debt Recovery Tribunal, New Delhi (DRT) against the Company and its subsidiaries, Religare Capital Markets Ltd (RCML) and Religare Capital Markets International (Mauritius) Limited (RCMIML) amongst other, for recovery of Rs 312.93 crore in relation to a Credit Facility obtained by RCMIML from Axis Bank. While the Company had not provided any guarantee/securities in relation to the aforesaid Facility, Company had executed a Non Disposal Undertaking (NDU) in favour of Axis Bank, with regard to its equity shareholding in CHIL. The Honble DRT had passed interim restraint orders dated 21.03.2018 and 26.08.2019, against the Company amongst others, restricting it from sale of any assets. In view of same the Company settled the dispute with Axis Bank by paying a total settlement amount of Rs 170 crore, in tranches (Rs 17 crore in FY20 and Rs 153 crore in June 2020) and pursuant to this settlement the Honble DRT vide its order dated July 13, 2020 has deleted REL, RCML and RCMIML from the list of parties and vacated interim restraints orders passed earlier.

Settlement with Private Equity shareholders of RFL:

Resurgence PE Investments Limited (formerly known as Avigo PE Investments Limited) (“Resurgence”) and NYLIM Jacob Balias India Fund III, LLC (“Jacob Balias”) (‘Investors) had a 14.36% stake in Companys subsidiary Religare Finvest Limited (RFL). The Investors were pursuing a legal case with the Company in Delhi High Court owning to a put option agreement executed during the time of their investment in RFL, making a claim of approximately Rs 677 crores on REL & RFL. During FY20, the Company acquired back the entire stake of 14.36% from the Investors in Rs 47.05 crore and also amicably settled the dispute for a consideration of Rs 8.95 crore as Settlement Amount (currently deposited with registrar of Delhi High Court). As on March 31, 2020, RFL is 100% owned by REL.

COVID-19 Impact:

The COVID-19 pandemic has significantly impacted the economic activities and business operations of the companies across the Country on account of lockdown that started towards the end of the financial year. This has inter alia affected the business operations of subsidiaries of the Company engaged in the business of lending, housing finance, broking and insurance since the last week of March 2020. Further, in accordance with the RBI guidelines relating to ‘COVID-19 Regulatory Package dated March 27, 2020, RFL and RHDFCL have offered EMI moratorium to its customers based on requests as well as on a suo-moto basis. Estimates and associated assumptions applied in preparing the consolidated financial statements of the Company, especially for determining the impairment allowance of Rs 38.2 crore for RFL and of Rs 1.74 crore for RHDFCL on a consolidated basis, based on historical experience and other emerging/ forward looking factors on account of the pandemic. CHIL created an additional provision of Rs 24.46 crore towards premium deficiency, based on the review conducted and as advised by its Appointed Actuary, which is also in terms of its accounting policy on Premium Deficiency Reserve.

The Group believes that the factors considered are reasonable under the current circumstances. The Group has used early indicators of moratorium and delayed payment metrics observed along with an estimation of potential stress on probability of default and exposure at default due to COVID-19 situation in developing the estimates and assumptions to assess the expected credit losses on loans and has recognised an additional expected credit loss of Rs 64.4 crore on a consolidated basis. Given the dynamic nature of the pandemic situation, these estimates are subject to uncertainty and may be affected by the severity and duration of the pandemic. In the event of the impacts being more severe or prolonged than anticipated, this will have a corresponding impact on the carrying value of financial assets, the financial position and performance of the Group.


The table below lists the key subsidiaries with operations as at March 31, 2020 :

Company Status RELs Stake Major Area(s) of Operation
Religare Finvest Limited (RFL) Subsidiary 100% • SME Finance
Religare Housing Development Finance Corporation Limited (RHDFC) Step down subsidiary (held through RFL) 87.5% • Affordable Housing Finance
Health Insurance
Care Health Insurance Limited (CHIL) Subsidiary A88.95% • Health insurance & related products
Religare Broking Limited (RBL) Subsidiary 100% • Retail Broking
• Depository & E-Gov. Services
Religare Commodities Limited (RCL)# Subsidiary (held through RBL) 100% • Retail Commodity Broking

^ The current shareholding of REL in CHIL is 71.84% on paid up capital bas

# The business of RCL has been sold to RBL on slump sale basis against a consideration of Rs 23 crore effective from Sept, 2019

SME Finance NBFC - Reliaare Finvest Limited (RFU

Religare Finvest Limited (RFL), is a wholly owned subsidiary of REL as on March 31,2020, is registered with RBI as a non-deposit taking, systemically important Non-Banking Financial Company (NBFC-ND-SI). RFLs business is focused on providing debt capital to Small & Medium Enterprises (SMEs) to enable them to enhance their productive capacity and throughput. It is amongst the first NBFCs in India to focus on this segment, having started the business in 2008 and by 2016, RFL had grown to build a peak business book of over Rs 16,000 crore to become one of the largest SME financing platforms in India. Currently, RFL has an employee base of over 350 and it has 20 branches pan India, servicing 24 locations. RFLs product offerings comprise of:

a) SME-Secured: RFLs SME-Secured product enables its customers to obtain loans against their residential or commercial property. Loans offered under this product may be utilized towards different purposes including business expansion and purchase of plant and machinery.

b) SME-Unsecured: This product caters to working capital and other financial requirements of small and medium enterprises, self-employed businessmen and professionals. Loans are granted after an in-depth and detailed financial analysis and credit underwriting of the clients.

c) Short Term Trade Finance: This product empowers our customers to bridge their short term financial gaps. Our short term trade finance gives freedom to SMEs to avail financing against purchase payables.

RBI Cap and Revival efforts:

The Reserve Bank of India (RBI) vide its letter dated January 18, 2018, advised RFL to adhere to Corrective Action Plan (RBI CAP), which inter-alia prohibits RFL from expansion of credit / investment portfolios other than investment in government securities and advised RFL to not pay any dividends. The past wrongdoings of the promoter group and ex-management resulted in siphoning of Rs. 2,037 crore through Corporate Loan Book (CLB) transactions, which came to light through forensic audits, various RBI reports and SEBI investigations. The other financial challenges faced by RFL, include misappropriation of Rs 791 crore of RFLs Fixed Deposit by Laxmi Vilas Bank (LVB) and other non-core (non SME) investments done by RFLs ex-management, which resulted in losses for the company.

RFLs new Board and Management have been taking necessary corrective measures as advised by the RBI and is making concerted efforts towards the revival of the company. Forensic audits, filing of legal proceedings for recovery of CLB funds, submission of criminal complaints & evidences to investigating agencies, expediting collections & recovery efforts, sale of NPAs to Asset Reconstruction Companies (ARCs), resolving other legacy issues and putting in place systems & controls for responsible corporate governance are some of the key steps being taken towards revival of RFL in last 2 years. Despite being under RBI CAP, RFL has repaid more than Rs 6,450 crore to its lenders since January 2018, including a sum of Rs 837 crore on March 26, 2020, during the COVID-19 lockdown.

In the current financial year under review, RFL proposed a Debt Restructuring Plan (DRP) to its lenders to correct the asset liability mismatch in its books. Religare Group also proposed sale of RFL alongwith its subsidiary RHDFCLto a strategic investor, TCG Advisory Services Private Limited (TCG), under the RBI circular on Prudential Framework for Resolution of Stressed Assets dated June 7, 2019. To this end, REL and RFL entered into a Share Purchase Agreement on October 1,2019 with TCG. However, RBI vide its letter dated March 20, 2020, did not accede to the acquisition of RFL and RHDFCL by TCG and directed RFL to submit a revised proposal for its revival. Subsequently, REL and RFL are making renewed efforts towards revival of RFL. In April 2020, RFL has submitted an updated DRP to the lenders and efforts are also being made to improve capital structure of the company.

Operational Performance

RFLs total loan book size was Rs 5,306 crore as on March 31,2020, decreased by around 25% during the current year. SME book constituted 52% of total book and amounted to Rs 2,775 crore. The Total income earned during the year was Rs 432.8 crore, declined by 44% from the last financial year. RFLs net NPAs stood at 28% of total book size and Capital to Risk Assets Ratio (CRAR) as on March 31,2020 was -40.80 %. During the year RFL repaid a sum of Rs 1,517 crore to its lenders. In the current financial year the company sold NPA Pool of Rs 582 crore to an ARC. Being under RBI CAP, RFL has focused its efforts on collections, recovery and correcting the asset liability mismatch in its books. RFL has approached its lenders in April 2020 with a revised Debt Resolution Plan and simultaneously efforts are also being made to raise necessary equity capital. RFL is taking necessary corrective actions and making all efforts to come out of the RBI CAP and resume normal business operations at the earliest.

RFL- SME Secured Lending:

As on March 31, 2020, RFLs SME-Secured loan book was at Rs 2,754 crore with 1,970 number of active accounts.

SME Secured Book Size YoY

RFL-SME Unsecured lending:

As on March 31,2020, RFLs SME working capital loan book stood at Rs 21 crore with 1,003 number of active accounts.

SME Unsecured Book Size YoY

Threats /Risks: In view of the COVID-19 pandemic impacting businesses, the President of India promulgated an Ordinance dated June 5, 2020 to further amend the Insolvency and Bankruptcy code, 2016. The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 inserts Section 10A which suspends the applicability of Section 7, 9 and 10 of the code to extend protection to corporates experiencing distress on account of the unprecedented situation, from being pushed into insolvency proceedings under the code for some time. Under the newly inserted Section 10 A no application for ‘initiation of CIRP shall be filed for any default arising on or after 25th March 2020 for a period of 6 months or such further period not exceeding 1 year. In the upcoming times, procuring adequate number of resolution applicants to rescue the corporate debtor and financial creditors will be another challenge.

Opportunities: Ministry of Finance has issued a notification dated February 24, 2020, stating therein that the registered non-banking financial companies (NBFCs) with assets worth INR 100 crore or more now qualify as ‘ financial institutions under SARFAESI, and are entitled to enforce security under SARFAESI for secured debts of INR 50 lakhs and above. This has significantly widened RFLs scope to use SARFAESI for enforcement of security in relation to the secured debt where the principal amount of the debt was less than Rs 1 crore.

Housing Finance - Reliaare Housing Development Finance Corporation Limited (RHDFCL1

Religare Housing Development Finance Corporation Limited (RHDFCL), a step down subsidiary of REL in which REL holds 87.5% equity stake through RFL, offers residential collateral backed mortgage loans for home purchase, construction, extension & renovation along with loan against residential property to customers both formal & informal income segment essentially belonging to the low & medium income groups. RHDFCL is registered Housing Finance Company (Non-deposit taking) with a SARFAESI License. RHDFCL operates through 27 branches as on March 31,2020 and has a diversified geographical presence across Delhi NCR, Rajasthan, Maharashtra, Gujarat, Madhya Pradesh, Tamil Nadu, Karnataka, Telangana and Andhra Pradesh. The company has remained profitable in each year of its operations since it became a part of the Religare group in year 2009.

RHDFCL envisions itself to be a future ready company and hence it aims to maximize digitization in its processes and work towards enabling an efficient workforce. The company is increasingly using analytics and big data to better understand inventory, migration and pricing trends. The ability to assess the credit worthiness of potential borrowers is crucial for succeeding in this segment; robust credit assessment processes position RHDFCL extremely well to capitalize on this opportunity. Customer centricity has also been a forefront vision of the company and company is following ‘Closer to Customer strategy to have a better outreach to the customers.

Operational Performance

During FY20, RHDFCL disbursed loans accumulating to Rs 17 crore and the total loan book size reduced by 18% to Rs 603 crore as on March 31,2020 from Rs 736 crore at the end of last FY19. The reduction in the book was primarily due to constraints faced by RHDFCL in raising more funds or liabilities from its lenders on account of financial stress faced by its parent company, RFL. The Total Income and PAT after OCI for the financial year were respectively Rs 101.8 crore and Rs 4.9 crore. The current book consists of 71% of affordable house loans followed with 24% of Loan against Property; the remaining 5% consists of builder loans. The average ticket size for the home loans has been Rs 12.2 lakh. RDHFCL maintained a CRAR of 56.95% as on March 31, 2020. The Gross NPA and Net NPA ratio were respectively 6.79% and 3.72% of the total assets. RHDFCL is working with its lenders towards mobilization of borrowings, since from an equity and regulatory capital perspective RHDFCL is very well capitalized with high CRAR of 56.95%. RHDFCL sales and distribution, risk management, operations functions are adequately robust to scale up lending operations in a prudent manner.

Insurance (Health & Travel) - Care Health Insurance Limited (CHIU

CHIL, 71.84% held by REL, ranks number 3 in terms of GDP amongst the Stand Alone Health Insurance Companies (SAHI). CHIL commenced business in 2012 and has a network presence at 1,000+ locations across country with 156 branches and 10,000+ hospitals empaneled for cashless claims. It has a product bouquet of 23 products encompassing group, travel, fixed benefit and indemnity categories to serve varied customer needs. CHIL has a differentiated service offering for corporate businesses, like wellness programs & preventive health checkup, thereby helping in negotiating higher premiums & improves customer stickiness. It follows a multi-channel distribution strategy through agency, brokers, corporate agents, online and bancassurance and its major focus is on retail and SME customers. CHIL has also successfully completed Ayushman Bharat mandate (government scheme) in Chhattisgarh. The company continued to invest in Digital properties for its customers, partners and its employees.

Operational Performance

During the FY20, CHIL garnered Gross Written Premium of Rs 2,409 crore, a growth of 31% over the previous financial year and reported PAT of Rs 66 crore. The total Asset Linder Management (AUM) of CHIL as on March 31, 2020 stands at Rs 1,778.4 crore. Further, the total investment portfolio is bifurcated between shareholders portfolio of Rs 544.4 crore and policyholders portfolio of Rs. 1,234 crore. The return generated in shareholder portfolio was 6.44%/annum and in policyholder portfolio return was 8.24%/annum. Overall 95.25% of the portfolio has been invested in Sovereign securities or instruments having highest rating profile. As on March 31,2020 CHIL had a Networth of Rs 585 crores. In FY20, CHIL attracted investments of Rs 27 crore from select investors on private placement basis and around Rs 31 crores from REL through investment in Rights Issue of CHIL. In June 2020, Kedaara Capital invested a primary capital of Rs 300 crore in CHIL along with investment in secondary purchase of CHIL shares. This capital infusion will help the company to make investments in distribution, technology, servicing opportunities and building healthy solvency margins. CHIL is continuously monitoring the impact of pandemic on the business operations.

Threats / Risks: IRDAI has instructed that COVID-19 claims will also be accepted as part of active health insurance policies. The Risks for COVID-19 were not factored in while at the time of issuance of earlier policies, hence additional claims related to COVID-19 may impact profitability of Health Insurance companies in FY21. Also some studies have shown that COVID-19 affects the co-morbidities such as diabetes, renal or other chronic diseases and this can result in longer trail of non COVID chronic claims for a for extended period beyond COVID-19 crisis.

Opportunities: Indian health insurance market is a growing market and registered a market size of Rs 56,798 crore in FY20, up by 11.6% from last year. Out of all health insurance service providers in India, Public Sector institutions have a market share of 46% and Private Insurers having a market share of 29% and Stand Alone Health Insurance Companies (SAHI) hold 25% market share. However in terms of retail Gross Written Premium (GWP), SAHI had the biggest share of 50% in FY20. The group believes that having invested in people, processes, alliances, technology and customer services, CHIL is well placed to serve and grow in the structural growth story of insurance sector in India and specially health insurance sector. Further the onset of COVID-19 has increased awareness towards need of Health Insurance products and this may result in additional demand for health product for next few years.

Retail Broking -Reliaare Broking Limited (RBL1

The Retail Broking business is primarily undertaken by Religare Broking Limited (RBL), a wholly owned subsidiary of REL, and its subsidiary Religare Commodities Limited (RCL)(stepdown subsidiary of REL). RBL provides trading capabilities across all product segments - cash equities, equity derivatives, commodities, currency derivatives, and mutual funds; on all major stock and commodities exchanges in India. RBL has more than 900 points of presence spanning 400+ towns and cities across the length and breadth of India and it services more than 1 million unique customers. RBLs distribution strategy entails a judicious combination of its own branches and a strong network of sub-brokers and franchisees which helps to extend RBLs presence and make the Religare brand visible in the far corners of India. RBL & RCL provides multi-platform options for trading such as Branch, Web, mobile App, Call & Trade to enhance customer convenience and ease. The Retail Broking business also has Bancinvest partnerships with various banks like Andhra Bank, Bank of Maharashtra, Corporation Bank, Dhanlaxmi Bank Limited, Induslnd Bank Limited, Karur Vysya Bank Limited, Sarasvat Bank, South Indian Bank Limited, Tamilnadu Mercantile Bank Limited, UCO Bank and Union Bank of India etc. Under the Broking business the following key segments operate:

• Retail Equity Broking: The retail equity broking business is operated by RBL. RBL is registered as a Stock and commodity Broker with Securities and Exchange Board of India (SEBI). RBL is a also member of the National Stock Exchange of India Limited (NSE), Bombay Stock Exchange Limited (BSE), Metropolitan Stock Exchange Limited of India Limited (MSE), National Commodity & Derivatives Exchange Ltd. (NCDEX) and Multi Commodity Exchange of India Ltd. (MCX). In addition, RBL is a depository participant with National Security Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL), which facilitates smooth settlement of clients delivery-based transactions.

• Retail Commodity Broking: Earlierthe commodity business was carried out by RCL, a wholly owned subsidiary of RBL, however to ensure better synergy and customer experience, from September 7, 2019, the commodity broking business was transferred to RBL on ‘slump sale basis. Commodity Broking provides platform for Exchange-based trading of futures in various agricultural products, bullion, metals and oil & gas provides producers, end-users and intermediaries who are exposed to price risks in these commodities, to lock-in future prices and thereby hedge their exposures. RBL is a member of National Commodity & Derivatives Exchange Ltd. (NCDEX), Multi Commodity Exchange of India Ltd.

• Retail Currency Broking: Trading in currency futures and options allows clients to hedge the capital and trading exposures they may have in currencies other than the Indian rupee. These products are offered by RBL as a member of the currency segment on NSE, BSE and MSEI. Currently, the exchanges permit futures trading in four currency pairs, viz. US dollar-lndian rupee, Euro-Indian rupee, Pound Sterling-lndian rupee and Japanese yen-lndian rupee, and options trading in the US dollar-lndian rupee pair.

• Ancillary Services: RBL is also a TIN (Tax Information Network) and PAN (Income Tax Permanent Account Number) facilitation partner of NSDL and offers services relating to PAN, TAN (Tax Deduction and Collection Account Number), and filing of TDS/TCS (Tax Deduction at Source/Tax Collection at Source) returns at select branches, to help its customers fulfill their major financial services needs under a single roof. RBL is also empaneled with E-mudra as Registering Authority/Agent for issuance of Digital Signature Certificate and is an AMFI registered mutual fund distributor. RBL is also registered as Point of Presence (POP) with Pension Fund Regulatory Development Authority (‘PFRDA) under PFRDA Point of Presence Regulations, 2015 and with Insurance Regulation & Development Authority as a composite corporate agent to distribute insurance products.

Operational Performance

During FY20, the turnover of Broking business increased by ~ 6% and RBL reported consolidated revenue of Rs 220 crore. The total traded volume was Rs 8.85 lakh crore in FY20 as compared to Rs 8.71 lakh crore in FY19. RBLs total traded volume in equity segment was Rs 6.95 lakh crore during FY20 compared to Rs 6.56 lakh crore in FY19. The share of the lower-yielding Futures & Options segment within overall market turnover continued to be high at 97.2% and the share of the better-yielding cash equities segment stood at 2.8%, with adverse implications on blended yields. During the financial year ended March 31,2020, RBL has entered into partnership with HDFC Life Insurance & ICICI Prudential Life Insurance for selling for selling Life Insurance. RCL won ‘Best Broking House -2019 Bullion by MCX and RBL also won - NSE Market Achievers Awards 2019- Regional Retail Member of the Year- North - 2019.

For better synergy the commodities broking business of RCL has been transferred to it is holding company RBL as a ‘slump sale (as defined as per section 2 (42C) of the Income - tax Act, 1961) with an effective date of September 7, 2019, at a total cash consideration of Rs 23 crore. The Board of Directors of Religare Advisors Limited, Religare Business Solutions Limited (both are wholly owned subsidiary of RBL) in their meeting held on December 18, 2019 have approved the Scheme of Amalgamation with Religare Enterprises Limited, the ultimate Holding Company. The Scheme of Amalgamation could not be filed with NCLT due to COVID -19 and will be filed with Honble NCLT in due course.

RBLs short term bank line rating is ‘[ICRA] A4@ on watch with negative implications. RBLs credit rating has been downgraded primarily due to financial stress at group level (arising out the financial irregularities at RFL done by the ex-management and promoters) and this restricted bank finance and capital for the business. Also Credit rating from ICRA for commercial papers (for an amount of Rs400 Crores) has been withdrawn in FY20. The Company and RBLs management is making concerted efforts to improve the situation. The Company is also of the view that with overall improvement of financial situation of the Group will also help RBL improve its credit rating. RBLs rankings and clientele continue to be robust. Given the robust infrastructure and clientele in place, the company believes that the business will start showing positive results post getting the desired level of funding in the business.

Threats/ Risk: A continued slowdown in real economy may result in pessimism towards capital markets. There is high amount of liquidity in markets due to monetary and fiscal easing by Central Banks globally and reversal of this phenomenon may impact market adversely. However, the penetration of Capital Markets in India is still low and it leaves a lot of scope to structural growth of markets. Further Broking business is seeing a lot of discount Brokers offering very low or negligible brokerage impacting profitability. RBL is adapting its products; technology and service experience to increase its volumes and mitigated this risk.

Opportunities: Overall, Financial Markets saw increase in trading activity in FY20. The average daily traded volumes (ADTO) for the equity markets during FY20 stood at Rs 14.44 lakh crore, up 45% YoY. The overall Cash market ADTO reported growth of 7.14% YoY at Rs 37,997 crore in FY 20. Delivery saw growth of 3% YoY to Rs 9,140 crore against the dip of 8% last year. Within derivatives, future volumes increased 1.6% YoY to Rs 88,954 crore while options rose 51% to Rs 13.16 lakh crore. The revival in market sentiments is expected to give push to the primary market activities and overall volumes. The commodities market has adjusted well to the new regulatory regime. After few years of hiatus due to systemic issues of the past, the regulator has proposed the introduction of new products and new participants in the market. As these efforts come to fruition, the commodities market will be well positioned to enter a new phase of growth.


The highlights of standalone and consolidated financial performance of the Company for the FY20 are as under:

(Rs in Crore)

Financial Year 2019-20

Financial Year 2018-19

Particulars Standalone Consolidated Standalone Consolidated
(Audited) (Audited) (Audited) (Audited)
Total Income 60.59 2,397.48 35.17 2,381.01
Total Expenditure 200.75 3,257.46 181.28 3,884.45
Profit before Tax (140.16) (859.98) (146.11) (1,503.44)
Exceptional Items (170.00) (170.00) - -
Profit / (Loss) before Tax after exceptional items (310.16) (1,029.98) (146.11) (1,503.44)
Share in Profit / (Loss) of Joint Ventures - 0.13 - 0.09
Profit / (Loss) before Tax (310.16) (1,030.12) (146.11) (1,503.53)
Provision for Tax - 7.86 - (2.58)
Profit / (loss) After Tax (310.16) (1,037.98) (146.11) (1,500.95)
Other comprehensive income (0.52) 13.84 0.16 3.95
Total Comprehensive Income for the period (310.68) (1,024.14) (145.95) (1,497.00)
Less: Share of Non- Controlling Interest - (103.57) - (213.48)
Total Comprehensive Income/ (Loss) (after tax and non-controlling interest) (310.68) (920.56) (145.95) (1,283.52)

Note: This is based on the consolidated financial statements that have been prepared and presented in accordance with Indian Accounting Standards (“Ind AS”) notified under Section 133 of the Companies Act, 2013 (“the Act”) read with the Companies (Indian Accounting Standards) Rules, 2015.

Consolidated Performance

For the financial year the Company recorded a ‘Loss after Exceptional Items and Before Tax of Rs 1,030.12 crore in comparison to ‘Loss After Exceptional Items and Before Tax of Rs 1,503.53 crore in FY19. ‘Loss After Tax and Share in Joint Venturewas Rs 1,037.98 crore for FY20 as compared to ‘Loss After Tax and Share in Joint Venture of Rs 1,500.95 crore for FY19. Total Comprehensive Income attributable to the Owner of the Company for the FY20 is Rs (920.56) crore as compared to Rs (1,283.52) crore in FY19.

Standalone Performance

The Company recorded a ‘Loss After Exceptional Items and Before Tax of Rs (310.16) crore, for FY20 as compared to ‘Loss After Exceptional Items and Before Tax of Rs (146.11) crore for FY19. ‘Loss After Tax was Rs (310.16) crore for FY20 as compared to ‘Loss After Tax of Rs (146.11) crore for FY19. ‘Loss before Exceptional Items was Rs (140.16) crore for FY20 as compared to Loss before Exceptional Items of Rs (146.11) crore for FY19. Reported basic Earnings Per Share (EPS) was Rs (13.16) in FY20 in comparison to Rs (6.93) in FY19.

Seament-wise Performance^Consolidated)

Our income from operations is comprised of income from lending activities, insurance premium, broking operations, interest from fixed deposits with banks, income from non-current investments, income from current investments, interest from delayed payments, profit on assignment of loans, income from advisory services, investment management and advisory fees and income from arbitrage and trading of securities and derivatives. A comparison of the income from our operations in FY 20 and in FY 19 is tabulated below:

(Rs in Crore)


As per Ind AS


FY 19

Amount % of Total income Amount % of Total income
Income From Lending Activities 479.55 20.00% 788.35 32.82%
Interest Income on Fixed Deposits with Banks 16.91 0.71% 24.17 1.00%
Interest Income/Charges on Delayed Payments 23.82 0.99% 30.88 1.29%
Income from Investments 119.14 4.97% 92.44 3.85%
Commission Income 34.05 1.42% 59.43 2.47%
Income From Broking Operations 167.96 7.01% 195.18 8.13%
Income From Advisory Services 0.11 0.00% 1.05 0.04%
Net Income From Insurance Premium 1,507.79 62.89% 1,090.10 45.39%
Other Business Income 6.03 0.25% 5.45 0.23%
Total Revenue From Operations 2,355.36 98.24% 2,287.06 95.22%
Other Income 42.12 1.76% 93.95 4.78%
Total Income 2,397.48 100.00% 2,381.01 100.00%

Details of Other Income (Consolidated):

Other income primarily includes balances written back/bad debts and loans written off recovered, profit on sale/ redemption of Investments, interest income on loans and fixed deposits with banks, etc. Our other income decreased to Rs 42.12 crore during FY20 constituting 1.76 % of our total income for such period as compared to Rs 93.95 crores for FY19 constituting 4.78% of our total income for such period. Below is a comparison of the components of our other Income during FY20 with that in FY19.

(Rs in Crore)

Particulars FY 20 FY19
Balances Written Back /Bad Debts and Loans Written off Recovered 1.85 3.56
Income From Support Services 0.67 5.14
Interest Income From Fixed Deposits With Banks* 0. 22 19.87
Net Gain on de-recognition of Property, Plant and Equipment 0.84 0.51
Profit On Sale Of Flats Linder Construction Held For Sale (Net) 0.0 0.01
Profit on Sale/Redemption of Investments (Net) 5.26 39.78
Interest Income From Investments 5.83 2.11
Interest Income on Others 16.63 16.95
Income towards ARC transaction (Net) 5.50 0.0
Miscellaneous Income 5.32 6.03
Total Other Income 42.12 93.95

Key Ratios (Consolidated level):

Particulars FY 20 FY 19
Total Income 2,397.48 2,381.01
EBITDA 50.12 (627.72)
EBITDA Margin (%) 2 (26)
PBT (1,029.98) (1,503.44)
PBT Margin (%) (36) (63)
PAT (1,037.98) (1,500.95)
PAT Margin (%) (43) (63)
Current Ratio 0.65 0.95
Debt Equity Ratio 27.57 6.38
Return on Networth * (534%) (143%)

*The main reason for decrease in Return on Networth is:

Impairment loss booked in FY20 is Rs 374.23 crore and Rs 1390.55 crore in FY19, Capital commitment/settlement cost booked during FY20 Rs 178.95 crore (Axis Bank Settlement and on purchase of stake of RFL) and expense booked under claim and other benefits in FY20 are Rs 891.94 crore against Rs 602.67 crore in FY 19.


The Company and its key operating subsidiaries have adequate control environment for identification and assessment of applicable risks on a periodical basis. Mitigation plans and controls are documented for each identified risk in the form of policies & procedures and risk & control matrices (RCM). Risks/controls documented in the risk and control matrices are mapped to each of the financial statement line items and financial assertions to ensure availability of mitigation plans and internal financial controls for each of the material balances contained in the financial statements. The Company has a centralized Internal function to review and evaluate the efficacy and adequacy of internal control systems, compliance with operating systems, accounting procedures and policies. The Internal Audit function is carried out by a reputed external firm and findings and recommendations are presented to the respective Audit Committees.


As on March 31,2020, Religare Group had a team of 10,708 dedicated professionals. Employees are our vital and most valuable assets; and our continued belief in people being key differentiators has guided our functional initiatives towards leveraging potential of employees to take additional responsibilities and providing them with opportunities to navigate through the current period and help the organization achieve its business goals. As the transition of the Company in to this new phase continues, our Management and employees are strongly aligned towards building an enabling eco-system to restore high growth and profitability. In line with the business strategy, talent strategy has been focused on employee engagement, providing role elevation opportunities to existing talent and developing a strong culture of transparency through constant employee communication.

The Company has also been dedicated to offering its employees favorable and safe work environment, especially given the global pandemic of COVID-19. To prepare for the pandemic the Company issued an employee advisory on March 15, 2020, which required work planning for critical tasks and encouraging employees to largely work from home. Special measures relating to travel, self-isolation, social distancing, etc. were implemented immediately. As per the guidelines issued by the Government of India, States and other concerned authorities for taking preventive measures to protect the citizens from this global medical emergency due to COVID-19, the Company and its subsidiaries kept its offices closed at all locations from March 23, 2020 and a Policy for Work From Home under the situation arising due to COVID-19 pandemic was introduced, which was regularly updated as per the guidelines received from concerned authorities. Business Continuity was ensured through availability and accessibility of required data to authorize personnel of the Company through a secured channel, post connecting VPN (Virtual Private Network).

In view of the relaxations provided by the Order issued by Ministry of Home Affairs (MHA), Govt, of India, the offices of Company have been resumed in a phased manner in Delhi & Noida from May 18, 2020 with strict protocols and Do & Donts to be followed by the staff. Downloading of Aarogya Setu app by employees with smartphone has been mandated and a self-declaration form, which also captures information from the app, is required to be signed by each employee on each day of attending office. Similarly the offices of the subsidiaries across the country are also being resumed in a phased manner with due precautions and safeguards.

At Religare Group, Business and Human Resource teams are continuously striving towards achieving business objectives, dealing with exceptional adversities, ensuring adherence to established human resource processes and policies, maintaining credible communication with employees, to reinforce the professional value system and transparent work culture of the Group.