NEW DELHI, June 20
In a development that could bring the Burman family closer to acquiring Religare Enterprises (REL), the Securities and Exchange Board of India (Sebi) on Thursday directed the management and board of the company to apply to all regulators, including the Reserve Bank of India (RBI), for making an open offer.
In an interim order-cum-show cause notice, the market regulator also sought an undertaking from the company to make this application before July 12, seeking all the requisite approvals necessary for proceeding with the open offer by the Burmans.
The Burmans, who hold 26% in Religare, had alleged that the Religare board and chairperson Rashmi Saluja were blocking the open offer by contending that the Burman family was not ‘fit and proper’ for the acquisition.
In a strongly-worded order, Sebi also reprimanded Saluja and the board for failing to comply with the Substantial Acquisition of Shares and Takeovers (SAST) regulations after the Burman family launched an open offer to acquire additional shares in the financial services conglomerate.
Since the target company, even after explicit advice from Sebi, has refused to take appropriate steps for making applications to regulators for statutory approvals, the regulator said it is left with no other option but to issue urgent directions to the noticees to take appropriate steps in this regard.
In response to the order, a spokesperson from Religare said, “As per Sebi’s advisory, the company will apply for the fit and proper status of the acquirers for the open offer to the regulators concerned, including the RBI.”
A spokesperson of the Burman family said, “We remain committed to completing the open offer in the interest of public shareholders of Religare.”
Religare, which has non-banking, insurance, and broking units, needs approvals from the RBI, Sebi, and insurance regulator IRDAI.
The market regulator also emphasised that since the open offer obligations of the acquirers have consequently given rise to shareholders’ right to have an exit option, “any further delay is likely to cause prejudice to the rights of the shareholders.
The target company cannot be allowed to impinge on the rights of the shareholders and their fate cannot be left hanging in the balance.”
The share price of REL rose 4% on Thursday. Since the open offer proposal was made by the Burmans on September 25 at Rs 235 per share, the stock price of REL has fallen by over 17.53%, from Rs 272 to Rs 224, eroding the market capitalization of the company by almost Rs 1,400 crore.
Shriram Subra-manian, founder and managing director of proxy advisory firm InGovern, said, “It is a very hard-hitting Sebi order as the company and its board have tried to defy even the regulator.” The REL board, he added, has not acted in the best interest of the company or its shareholders and has usurped the rights of all shareholders, including those of the minority shareholders.
REL had earlier informed the exchanges that the RBI had expressed its inability to accede to the application, as prior permission for acquiring control or change in management has to be submitted by the non-banking financial company, not the acquirer. The Burmans, at that time, claimed that the management was not performing its fiduciary duties.
The conflict between the REL management and the Burman family escalated after the latter proposed to make an open offer for acquiring an additional 26% on September 25.
Four entities of the Burman family — Puran Associates, Vic Enterprises, MB Finmart, and Milky Investment & Trading Company — which already held 21% in REL, intended to trigger the open offer upon acquiring another 5%. Currently, these entities hold 26.16% in the company.
Initially, the REL claimed that the open offer price was too low. Later, they questioned the Burmans’ ‘fit and proper’ status. Sebi also pointed out that REL had incorrectly concluded that it had no jurisdiction over the matter, despite Sebi’s instructions to the board to apply for regulatory approvals.
Regarding REL’s allegations against the Burman family, Sebi noted that REL had failed to provide any documentary evidence to support its claims that the Burman family was not fit and proper.
