Burman Open Offer Gains Momentum as SEBI Directs Religare’s Board for Approval

Introduction              

The Burman family’s open offer for Religare Enterprises Limited has received a significant boost following a directive from the Securities and Exchange Board of India (SEBI). The regulatory body has instructed Religare's board and its chairman, Rashmi Saluja, to seek the necessary approvals for the open offer, signalling a pivotal moment in the acquisition process.

Background of the Burman Open Offer

• The Burman family, known for their ownership of Dabur India, announced an open offer to acquire an additional 26% stake in Religare Enterprises Limited. This move is part of their strategic plan to expand their footprint in the financial services sector. The open offer, if successful, will strengthen the Burman family’s control over Religare, allowing them to drive significant changes and improvements within the company.
• The Burmans, who lead consumer goods company Dabur Ltd, already own more than a 25% stake in REL and need to complete an open offer, as per India’s securities regulations.
• The Burman family holds shares in Religare Enterprises through various entities, including MB Finmart, Puran Associates, VIC Enterprises, and Milky Investment and Trading Co. These entities are associated with cousins Anand and Mohit Burman.
• The family built up its shareholding in Religare over five years after initially acquiring a 9.9% stake in April 2018. They increased their stake to 14% in June 2021 and then acquired an additional 7.5% in August 2023.
• But for further acquisition, Religare needs to apply to three regulators to seek approval for the open offer, which it has resisted insisting that the Burmans are not “fit and proper" to take over the company.
• On May 31 and earlier this month, Religare informed SEBI that the regulator had overstepped its authority by asking the company’s board to comply with its Substantial Acquisition of Shares and Takeovers (SAST) regulations.

SEBI’s Directive

• In a notice dated June 19, SEBI stated that Religare has violated the provisions of Regulation 26 of the SAST Regulations, 2011, and has failed to adhere to the underlying principles governing these regulations.
• The regulator also stated that Religare had erroneously concluded that SEBI lacks jurisdiction over the matter. This conclusion was made despite SEBI's explicit instructions to the board to seek regulatory approvals.
• According to SEBI regulations, the target company (Religare) needs to apply for all the necessary approvals. This has delayed the open offer, as the Religare board became hostile following the Burmans' launch of the open offer for Religare. Since Religare Enterprises Limited (REL) operates non-banking, insurance, and broking units, it must obtain approvals from multiple regulators: the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), and the Insurance Regulatory and Development Authority of India (IRDAI).
• Additionally, SEBI instructed Religare to form a committee of independent directors if such a committee is not already in place. However, the reason behind this directive was not disclosed.
• SEBI’s directive is seen as a critical development in the ongoing acquisition process. By instructing Religare’s board and Saluja to seek approvals, SEBI is emphasizing the need for due diligence and compliance with regulatory standards. This step ensures that the open offer progresses in a transparent and orderly manner, safeguarding the interests of all stakeholders involved.

Market Reactions

The stock market has reacted positively to the news, with Religare’s shares witnessing an uptick following SEBI’s announcement. Investors are optimistic about the potential benefits of the Burman family’s increased involvement in the company. Analysts suggest that this move could lead to improved financial performance and greater investor confidence in Religare.

Next Steps

• With SEBI’s directive in place, the focus now shifts to the procedural aspects of the approval process. Religare’s board is expected to convene soon to discuss and finalize the necessary steps to comply with the regulatory requirements. This will include obtaining approvals from shareholders and other relevant authorities.
• In parallel, the Burman family is likely to intensify their engagement with Religare’s management and stakeholders to ensure a smooth transition and integration post-acquisition. Their strategic plans for Religare will be closely watched by industry observers and investors alike.

Conclusion

• SEBI’s directive marks a crucial milestone in the Burman family’s open offer for Religare Enterprises Limited. As the approval process moves forward, all eyes will be on how the stakeholders navigate this pivotal phase. The successful completion of the open offer has the potential to reshape Religare’s future, ushering in a period of renewed growth and stability under the Burman family’s stewardship.
• This development underscores the importance of regulatory oversight in major corporate transactions, ensuring that such moves are conducted with transparency and accountability. The coming weeks will be critical in determining the outcome of this significant acquisition and its impact on Religare’s trajectory in the financial services sector.