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Board versus Burmans: Where is Religare’s tussle with its biggest shareholder headed?



Uncertainty looms over Religare Enterprises Ltd (REL), a financial services company with several subsidiaries, which bounced back from a crisis triggered by the arrest of its former promoters Malvinder and Shivinder Mohan Singh in 2019. The board is battling the Burmans, its biggest shareholders and the promoters of Dabur Ltd. who are launching an open offer to take over the company.

The board has no shareholder representation. It has six members including Chairperson Rashmi Saluja who has an executive role. All the other members are retired civil servants except Hamid Ahmed, who is the CEO of Hamdard Laboratories and chancellor of Jamia Hamdard University.

At the centre of the dispute is the Burmans buying a 5.27% stake in September, triggering a mandatory open offer to buy an extra 26% stake, since they already held a 21.5% stake. The board had welcomed the offer at that time but has now rejected it.

A “Fishy” offer

Ahmed has described the timing of the Burman family open offer to buy more shares as ‘fishy’ in the first such media comments by any of the independent directors. “The merits of the offer are not very good. They want to replace the board and the management,” Ahmed told ET a few days ago. “The company has come out of heritage problems. At such a time, the offer looks a bit fishy.”

Speaking to ET Now today, JN Gupta of Stakeholders Empowerment Services, a corporate governance research and advisory firm, has criticised the board for its stance on the open offer.

“If you look at the disclosures made by Religare sometime in September, the board had welcomed Mr. Burman and his company and said that this open offer or this takeover is in the interest of the shareholders,” Gupta said. “That was one decision. Now, independent directors, either collectively or individually, are making comments that no, no, no, it is fishy or something is wrong. I do not know whether their first opinion was correct or second opinion is correct but shareholders have certainly a right to know from the independent directors as to what is the reason for their diametrically opposite opinion.” Gupta also questioned the absence of shareholdes on the board. “Here a professionally managed company or rather a company where none of the shareholders are represented on the board, is saying that we do not want any of the shareholder representatives on the board. I do not understand why?” he said.

The issue of share price

Ahmed had told ET that the offer price is below the share price.Without divulging the details, Ahmed alluded to the movement of the company’s stock price as an indicator that things were not normal. “In the past couple of months, the share price movement has also been suspect, which is what we have flagged to the regulators. Let the regulators decide,” he said.

Religare’s shares closed at Rs 223.65 apiece on the BSE on Friday. The Burmans have offered to acquire shares from the company’s existing shareholders at Rs 235 apiece. When the offer was announced in September, Religare’s shares were trading at Rs 275 apiece.

“The open offer price is calculated as per the formula provided in the takeover regulations,” a Burman family spokesperson told ET recently. “As per this formula, the calculation comes to around Rs 221. The offer price of Rs 235 is at a premium to that price.”

Saluja’s ESOPs
Another controversy is around ESOPs granted to Saluja, an executive member and the chairperosn of the board.

Proxy advisory firm InGovern Research has raised a red flag against Religare Enterprises alleging “vested interest” of its Saluja due to excessive remuneration as well as regulatory breaches. In the last three-four years, the total valuation of options of REL and its subsidiary Care Health Insurance Limited (CARE) to Saluja is over Rs 480 crore, which is in addition to compensation paid at REL, said a report from InGovern.

Shares of CARE were issued to Saluja through ESOPs, despite rejection from IRDAI (Insurance Regulatory and Development Authority of India) and no approval from the shareholders of REL was also taken for that, InGovern claimed in its report.

Also, the Burmans have objected to Saluja selling her shares after meeting with their representative and have alleged that she has benefited from insider information about their intention to launch an open offer.

However, the board as well as the largest shareholder of CARE, Kedaara Capital, have backed Saluja on this issue.

What lies ahead for Religare
Independent director Ahmed told ET a few days ago that the Burmans want to replace the board and the management. “It is one company that has had legacy problems,” he said. “A resolution between banks and the company has taken place at Religare Finvest. In such a scenario, how can one seek replacement of the board and the management? The company has undergone a transformation. This is not the time for replacements.”

However, Mohit Burman, Chairman, Dabur Group, told ET a few weeks ago that the family had voted in favour of Saluja’s reappointment as chairperson two days after the open offer announcement.

Speaking to ET Now recently, Mohit Burman said he had no intention to change the REL board, citing the case of Eveready company in which Dabur had bought a stake. “At the end of the day what did we do in Eveready? We never changed the board. We never changed the management. It has the existing CEO and the same board. All we did was supplement the board and provide the management with a good second layer of people who might have not joined Eveready before but joined them because the Burman family are in control and now the results are showing. We got a strategic advisor to come and give us what to do next and you will see the results yourself,” he said.

The plan of action for the Burmans now is getting all the regulatory approvals. “We have already applied to the CCI, that should come in the next few weeks. Then, we have SEBI, IRDA and RBI. As I said, we have already met the fit and proper test for most of these regulatory bodies,” Burman said.

Whne asked if the Burmans will call for an AGM and appoint a shareholder representative on the board, Burman said they would just continue getting approvals. “At the end of the day, the shareholders can decide whether they want to tender their shares into the open offer or not,” he said. “All the other options which can cause any sort of problems to the acquisition, we are not looking at those,” he added.

India’s takeover regulations have a provision for independent directors to give their comments on an open offer announcement made to shareholders once such an offer has been approved by the regulator. These are only meant to provide shareholders with some investment-decision guidelines with respect to their existing holding in the target company’s stock.

The Burman family has also alleged that a recent FIR by Mumbai Police linking Chairman Mohit Burman and director Gaurav Burman to the Mahadev Book illegal betting case is an attempt “to block the acquisition of Religare Enterprises”.



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