A fierce corporate struggle is underway as the Burman family, one of India’s oldest and most respected business houses, attempts to take control of Religare Enterprises. The Burman family, best known for their ownership of Dabur, has steadily increased their stake in Religare, turning the spotlight on a dramatic tussle for control between the company’s management and its largest shareholder. Here’s a breakdown of the ongoing corporate war and the challenges both sides are facing.
The Takeover Bid: Burman Family’s Increasing Stake in Religare
The Burman family, which already had a significant stake in Religare Enterprises, increased its ownership to 26.51% in late September 2023. According to SEBI (Securities and Exchange Board of India) regulations, once a shareholder’s stake crosses the 25% mark, they are required to make an open offer to other shareholders. In line with this, the Burman family launched an open offer, aiming to acquire a further 26% of the company’s shares.
This move signifies their clear intention to take full control of Religare, a financial services company that has been through its share of troubles in recent years. For the Burman family, taking over Religare would mean expanding their business portfolio, but it would also mark a significant shift in the control and management of the company.
Religare’s Resistance: Why the Management Is Pushing Back
While the Burman family is making aggressive moves to acquire Religare, the company’s current leadership isn’t going down without a fight. Led by Chairperson Rashmi Saluja, Religare’s management has resisted the takeover, arguing that the Burman family lacks the expertise needed to manage a financial services company like Religare.
Religare has been pushing back on the open offer, stating that the Burman family’s experience with their consumer goods business, Dabur, doesn’t necessarily translate to managing a non-banking financial company (NBFC). Furthermore, the management has presented a case to SEBI and other regulators to block the takeover, claiming that the acquisition wouldn’t be in the best interests of the company or its shareholders.
Regulatory Battles: SEBI and ED’s Involvement
The battle for control between Religare and the Burman family has also drawn attention from regulators, adding another layer of complexity to the situation. In September 2023, SEBI intervened by asking Religare’s board to prepare for the open offer by the Burman family. However, tensions escalated further when SEBI issued a show-cause notice to Religare Chairperson Rashmi Saluja, accusing her of insider trading.
The timing of this accusation raised eyebrows, as it came just days before the Burman family made their open offer. According to reports, Saluja is being investigated for allegedly selling shares of Religare Finvest and other subsidiaries, which totaled over Rs 600 crore in value, just before the takeover bid.
Adding to the company’s woes, the Enforcement Directorate (ED) has also started investigating Saluja and two other board members for fraud. The ED’s investigation centers on accusations that Saluja and her associates conspired to block the Burman family’s takeover by making false allegations against them.
The Role of ESOPs in the Dispute
A key issue in this conflict is the allocation of shares through Employee Stock Ownership Plans (ESOPs). Religare Enterprises’ management, particularly Rashmi Saluja, is accused of transferring large amounts of shares from the company’s subsidiaries to herself under the guise of ESOPs.
InGovern, a proxy advisory firm, estimated that shares worth Rs 630-740 crore were transferred to Saluja, including Rs 480 crore from the company’s health insurance subsidiary. The Burman family has challenged this, claiming that such transfers are part of a broader effort to undermine their takeover bid.
SEBI and the insurance regulator IRDAI (Insurance Regulatory and Development Authority of India) have also stepped in, questioning these ESOPs. In July 2023, IRDAI imposed a fine of Rs 1 crore on Religare’s subsidiary, Care Health Insurance, for giving shares to Saluja without regulatory approval. The case is still ongoing, and the outcome could have significant implications for the Burman family’s acquisition efforts.
Religare’s Defense: Burman Family Not “Fit and Proper”?
In their attempt to block the takeover, Religare’s management has questioned whether the Burman family is “fit and proper” to run a financial services company. Under SEBI’s Substantial Acquisition of Shares and Takeover regulations, shareholders who wish to acquire significant stakes in NBFCs must meet the “fit and proper” criteria.
Religare’s board has argued that the Burman family, despite their successful history with Dabur, doesn’t have the necessary experience to manage a financial company like Religare. However, SEBI has countered this argument by stating that unless the acquiring company has defaulted on loans or been involved in significant financial wrongdoing, it generally passes the “fit and proper” test.
Insider Trading Allegations: What’s Next for Saluja?
The allegations of insider trading against Rashmi Saluja have further complicated the situation. SEBI is investigating trades made by Saluja on September 21 and 22, 2023, just days before the Burman family launched their open offer. During this period, Saluja reportedly sold 12.9 lakh shares, which were valued at approximately Rs 34.71 crore at the time.
Four investment firms with links to the Burman family have lodged complaints against Saluja, alleging that she had prior knowledge of the open offer and used this information to her advantage. SEBI is currently investigating these claims, and depending on the findings, the situation could take a turn in favor of the Burman family.
ED Investigation and Accusations of Fraud
Adding to the turmoil, the ED has launched its own investigation into the actions of Religare’s leadership, specifically Rashmi Saluja and two board members. The ED has accused them of conspiring to stop the Burman family’s takeover bid by making false allegations against them.
A key figure in this investigation is Vaibhav Gawli, a shareholder in Religare Enterprises, who filed a complaint against the Burman family. Gawli has since retracted his accusations, claiming that he was paid by Saluja and other board members to file the complaint. According to the ED, Gawli admitted to receiving money in exchange for making false claims about the Burman family’s involvement in financial misconduct.
The Road Ahead: What Does the Future Hold for Religare Enterprises?
The conflict between Religare Enterprises and the Burman family shows no signs of slowing down. With regulatory bodies like SEBI, IRDAI, and the ED involved, the situation is likely to remain tense in the coming months. For now, both sides are fighting hard to secure their position, but it remains to be seen whether Religare’s management can fend off the Burman family’s takeover bid.
With accusations of insider trading, fraud investigations, and questions over corporate governance swirling around the company, the future of Religare Enterprises hangs in the balance. Regardless of the outcome, this corporate tussle will have a lasting impact on the company’s leadership and its direction moving forward.
