Religare Enterprises shares in focus as Care Ratings says outlook stable for subsidiary

Shares of Religare Enterprises Limited will be in focus on Thursday's trade after Care Ratings assigned a CARE BB+ rating and a 'Stable' outlook to Rs 500 crore long term bank facilities of Religare Housing Development Finance Corporation (RHDFCL), a step-down subsidiary company.

Care Ratings said its outlook reflects the expectation that subsidiary will be able to raise additional debt through fund and non-fund-based support from its ultimate parent – Religare Enterprises and, thus, will achieve growth in the portfolio over the medium term while maintaining asset quality.

Care Ratings said the rating assigned to Religare Housing Development Finance Corporation Limited (RHDFCL) factors in the company’s comfortable capitalisation with a gearing of 0.25 times and its adequate liquidity position.

"The rating also reflects the successful completion of a one-time-settlement (OTS) with 16 lenders of its parent, Religare Finvest Limited (RFL). Post OTS, RFL’s standard assets are now sufficient to cover its outstanding unsecured debt (secured debt is nil), and thereby, limit any external funding requirements," Care Ratings said.

Care Ratings, however, said RFL is still placed under the RBI's corrective action plan framework, due to which it cannot make any incremental disbursements or investments (except investments in government securities), which is one of the key constraining factors.

The rating agency noted that Religare Enterprises, the holding entity of the Religare Group, plans to purchase 87.5 per cent of equity stake of RHDFCL from RFL, pending regulatory approval. Care Ratings said its rating is further constrained by the moderate scale of operations and weak resource profile given no additional debt has been raised since August 2017 owing to issues at the parent level.

Shares of Religare Enterprises have risen 1.77 per cent in 2023 so far against a 6.8 per cent rise in the BSE500 index.

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