Religare Finvest Ltd (RFD), the subsidiary of Religare Enterprise Limited, has been downgraded by the credit rating agency ICRA after the Securities and Exchange Board of India's October 17 order said it was the ultimate beneficiary of the inter-corporate deposits (ICDs) of Rs 200 crore from Fortis Healthcare Limited (FHL). The ICRA has revised the rating for the Rs 300 crore long-term debt programme of Religare Finvest to [ICRA] BB from BBB-. It has also revised the rating for RFL's Rs 9,000-crore bank limits to [ICRA]BB/[ICRA]A4 from [ICRA]BBB-/[ICRA]A3. The long-term, as well as short-term ratings for Religare Finvest, continue to be on "watch with negative implications".
The SEBI has directed Religare Finvest to pay back the ICDs (loans) along with interest within three months. Also, pending the completion of the investigation, RFL cannot dispose of any of its assets or divert any funds, except for paying back the ICDs and for meeting expenses for day-to-day business operations.
Religare, in its filing with the SEBI, informed that ICRA has said that SEBI's observations are prima facie and an investigation is underway. ICRA also noted that, as per RFL's management, the receipts of funds in its books are independent commercial transactions, which are not connected to any observations made in the SEBI order. RFL also plans to file a response and seek a personal hearing with SEBI regarding the said order, said the company.
The ICRA has observed that the additional liability of Rs 200 crore will further deteriorate the company's already stretched financial flexibility and liquidity profile. "Though RFL has sufficient liquidity to repay its liabilities that are due in the month of October, it may be restricted from doing so following the interim SEBI order," said the credit rating agency.
ICRA said it would be closely monitoring the developments on this front and if the company is restricted from repaying its debt, despite cash being available, there could be further pressure on its ratings. ICRA also noted that Religare Finvest has been repaying all its liabilities so far, through collections and prepayments on the existing loan book.
"A significant proportion of the repayments that are falling due in the coming months were likely to be repaid through a mix of inflows on the loan book as well as the sale of assets. However, with SEBI's interim order, there is a restriction on the sale of assets and hence the liquidity/heightened for RFL," said the rating agency.
In its order, Sebi had said Malvinder Singh, Shivinder Singh and eight other entities acted in a "fraudulent manner" and diverted funds from Fortis Healthcare Ltd to the promoters and their entities. The other eight companies mentioned in the Sebi order included Fortis Hospitals Ltd., RHC Holdings Ltd., Religare Finvest, Shivi Holdings Pvt Ltd., Malav Holdings Pvt Ltd., Best Healthcare Pvt Ltd., Fern Healthcare Pvt Ltd. and Modland Wears Pvt Ltd. Sebi said Fortis Healthcare and Fortis Hospitals diverted funds through Best, Fern, and Modland to the parent companies, RHC Holding and Religare Finvest, for the ultimate benefit of Shivi Holdings, Malav holdings, Shivinder Mohan Singh and Malvinder Singh.
Meanwhile, Religare Finvest has said that it plans to file a response and seek a personal hearing with SEBI regarding the said order.