Religare announces major demerger to unlock shareholder value

Metro India News | NOIDA

Religare Enterprises Ltd (REL), backed by the Burman family, has unveiled a significant restructuring plan to demerge its financial services and insurance businesses into two separate listed entities. The move, aimed at simplifying the group structure, sharpening strategic focus, and unlocking shareholder value, comes as the company reported mixed quarterly results with a widened net loss. 

Religare management outlined the key details of the demerger. Under the proposed scheme, REL will retain its 63.2% stake in Care Health Insurance Ltd (CHIL), which will continue operating as the insurance-focused entity. The financial services business—including lending, broking, investment activities, and related support services—will be transferred on a going-concern basis to Religare Finvest Ltd (RFL).

Shareholders of REL will receive one fully paid-up equity share in RFL for every share held in REL on a 1:1 basis. Any excess cross-holding shares in RFL will be cancelled to ensure the post-demerger shareholding mirrors the pre-scheme pattern. RFL is expected to be separately listed on the NSE and BSE. The company targets completion of the demerger and listing of RFL in the first quarter of FY28.

The restructuring is expected to create a simpler group structure, enable independent expansion for each business, and attract premium valuations, particularly for the insurance arm. Management highlighted that approximately 80% of REL's current value derives from its stake in Care Health Insurance. The non-insurance (financial services) business boasts strong operational metrics, prudent liquidity, and capital positioning, despite the mixed quarterly performance.

On the financial front, the company reported weaker-than-expected numbers for the third quarter. The net loss widened, reflecting ongoing pressures, while revenue showed limited strength. Brokerages have issued downgrades in response to the results. However, management clarified there are no immediate plans for equity fundraising or infusions for either arm post-restructuring, with both entities set to operate on their existing capital base.

The value-unlocking theme through this demerger is anticipated to drive positive sentiment and potential stock movement in the near term, particularly as the insurance business garners higher market recognition. In other market developments, several stocks remain in focus today amid Q3 earnings releases and company-specific news. 

Torrent Pharma delivered strong operational performance, Azad Engineering saw execution improvements with a 44% year-on-year PAT growth, and Fortis Healthcare posted a solid quarter despite seasonal weakness in the sector. However, Shakti Pumps faced headwinds from reduced government scheme allocations, resulting in a 70% year-on-year PAT decline. 

On the news-driven front, Manappuram Finance received RBI approval for a bancassurance tie-up, while Deep Industries secured a positive order win of Rs 148 crore from Oil India, offsetting a minor prior cancellation and maintaining long-term relations. Concerns linger in capital market-related companies following a recent RBI circular on exposure limits, particularly on the margin front, which could impact sentiment. These updates come amid the tail end of the Q3 earnings season, with investors closely monitoring both results and corporate actions for directional cues in the market.