Singh brothers lift shareholding in Religare

The founders of Religare Enterprises launch an open offer to minority shareholders as part of a plan to increase their stake in the Indian financial services firm to 85%, shortly after a failed bid for Parkway Hospitals.

The founders of Indian financial services firm Religare Enterprises yesterday launched an open offer to buy 20% of the free-float of the firm for Rs12.8 billion ($273 million). The move follows an announcement by the founders, brothers Malvinder and Shivinder Singh, earlier this week saying they will issue themselves shares and convertible warrants worth Rs5 billion and spend around Rs3.6 billion buying Religare shares in the open market.

Assuming the Singh brothers corner the maximum 20% of the issued share capital that they are offering to buy, their stake in Religare will increase to 85%. The brothers will then have to offload part of their holding to maintain a listing as they will not meet the minimum 25% free-float requirement. However, they will have three years to do this.

Further, it is not a given that the open offer part of the plan will succeed. The brothers are offering to buy the shares at a price of Rs457 per share, which marks a discount to the current market price. Despite losing almost 5% in yesterday’s trading on India’s National Stock Exchange, Religare shares closed at Rs477.

Indian investment bank Kotak Mahindra will manage the offer, which will take place in October. Kotak said in a filing with the securities regulator, the Securities and Exchange Board of India (Sebi), that the founders are increasing their shareholding to “create more flexibility in managing the operations of Religare”. Kotak could not be reached for comment.

Religare, which recently announced that it is likely to apply to the Reserve Bank of India (RBI) for one of several new banking licences, also did not respond to requests for clarifications.

In April both brothers relinquished their directorships of Religare whose current businesses range from insurance, asset management, broking and lending solutions to investment banking and wealth management, leading to speculation that they could be thinking of exiting the business. The brothers had earlier sold Ranbaxy Laboratories, the family pharmaceuticals business their grandfather founded, to Japan's Daiichi Sankyo.

At the time they stepped down from the Religare board the brothers said the move would free up their time to focus on the expansion of Fortis, their healthcare business. Since the sale of Ranbaxy, Fortis has grown the number of hospitals it manages through a slew of domestic acquisitions. And, in March, Fortis made a more aggressive move, buying private equity firm TPG Capital’s stake in the Parkway chain of hospitals, making Fortis the largest shareholder in the Singapore-listed company. Malvinder Singh was set to move to Singapore in his new role as chairman of Parkway.

However, Malaysian sovereign wealth fund Khazanah, which was the second-largest shareholder in Parkway, thwarted the plans. Khazanah tabled a competing bid for control of Parkway and in July Fortis abandoned its bid, which also included a voluntary general offer to minority shareholders, and agreed to sell its entire stake to Khazanah.

Fortis booked a tidy profit of around $85 million on the deal -- the difference between the price at which it acquired the Parkway shares from TPG Capital and the price at which it tendered the shares to Khazanah -- which must have been some consolation to the brothers whose ambitions to build a Southeast Asian hospitals chain were scuttled.

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