Banking News

From Singh Brothers to Burman brothers, Religare’s promoter blues continue


It seemed Religare Enterprises Ltd (REL), a financial services company with several subsidiaries, had bounced back from the crisis triggered by the arrest of its former promoters Malvinder and Shivinder Mohan Singh in 2019. After it got a new board and management, REL stock price went up more than 10 times since March 31, 2020 when it was at Rs 19. But nearly three years later, REL is again in the news for the wrong reasons.

Promoters of REL, brothers Mohit and Gaurav Burman, also the chairman of Dabur and its director respectively, have been named in an FIR by Mumbai police related to illegal betting through Mahadev Book betting app. In the FIR, 38-year-old complainant Prakash Bankar has alleged an aggregate revenue loss of Rs 15,000 crore to state entities due to the illegal betting syndicate that allegedly used cryptocurrency accounts and other digital means to route proceeds and evade the tax net. The Enforcement Directorate is also probing Mahadev Book and its promoters in a money-laundering case.

The Burman family has linked the FIR to the conflict at REL after the Burman brothers announced to raise their majority stake in the company to gain control of it. The Burman family said the FIR was an “arm-twisting” attempt that comes at a time when the family is in the process of acquiring REL. The family has also accused the REL chairperson of wrongdoing.

It seems the company is plunging back into controversy after nearly four years when it regained investor confidence.

Also Read: Dabur’s Burman seek probe into Religare share sale by chairperson

The Singh brothers case
Brothers Malvinder and Shivinder Mohan Singh, the scions of a prominent business family that owned Ranbaxy, one of the biggest Indian pharma companies, were the promoters of REL. They were arrested along with several other persons in 2019 for defrauding an REL subsidiary Religare Finvest Limited (RFL).RFL had alleged that the Singh brothers put RFL in poor financial condition by disbursing loans to entities having no financial standing and wilfully defaulted on repayments, causing it a loss of Rs 2,397 crore. The case relates to the diversion of funds of RFL during FY 2014-15 till FY 2017-18, in the garb of loans through layers of entities for the ultimate benefits of entities controlled by the erstwhile promoters, the Singh brothers. Also, the diversion of funds was never disclosed to the shareholders of REL, which misled them to remain invested in the shares of REL or deal in the securities of REL. Thus, the apparent diversion of funds also led to indirect manipulation of the price of shares of REL. Sebi had fined the duo for this while the criminal case is ongoing.

REL was founded and controlled till 2018 by the Singh brothers after which they lost control of REL due to the invocation of pledges by lenders. A board comprising independent directors was put in place to steer the company to safety and recover siphoned-off funds. The board, led by executive chairperson Rashmi Saluja, has been successful and the market has responded favourably..

The Burmans entry into Religare
The announcement by the Burmans a few months ago that they would raise their stake in REL led to a chain of controversies.

The Burman family had through various entities accumulated a 21.5% stake in Religare Enterprises Ltd. (REL) by August this year. In September, it bought another 5.27% stake, triggering a mandatory open offer to buy an extra 26% stake from the public. In the same month, the family announced plans to raise its stake in REL by investing $255 million in an open offer for a 26% stake, thus intending to take control of the company.

But nearly a month later, the independent directors of REL wrote to regulators such as RBI, Sebi and the insurance watchdog, levelling allegations of fraud and other breaches against the Burmans. They highlighted REL’s ownership of companies operating in regulated businesses and argued that the party seeking to acquire the business ought to be scrutinised for the “fit and proper” criteria that apply to licence holders in these segments. The allegations include charges of collusion with the erstwhile owners, the Singh brothers; a pending case of fraud against Dabur India chairman Mohit Burman; questions about the source of funds to be used for the acquisition; and market manipulation.

After the REL directors accused the Burmans of various wrong-doings came the FIR against brothers Mohit and Gourav Burman. The Burmans have linked the FIR to the ongoing conflict between them and the company directors.

The Burmans have also accused chairperson Saluja of wrong-doing. In an email to Sebi and bourses the entities of the Dabur family that collectively hold 21.24% in REL said Saluja sold a portion of her personal holdings, the employee stock options (ESOPs) in the firm soon after a meeting with a representative of the Burmans in which she was informed of the Burmans’ intention to make an open offer to acquire control of the company. However, a Religare spokesperson said the meeting with Burmans’ representative had nothing to do with the sale of shares by Saluja.

The controversy has flared up with shareholder advisory firm InGovern claiming that a reading of REL’s annual reports shows its chairperson Saluja earned “excessive” compensation, and that there were regulatory breaches and non-disclosures by the financial services company.

InGovern estimated the value of Saluja’s stock options of Religare and of its subsidiary Care Health Insurance over the past 3-4 years at ?480 crore. It alleged that Care stock options were issued to Saluja without the insurance regulator’s approval and without approval from Religare’s shareholders. However, responding to the criticism from the shareholder advisory firm. Care’s independent director Pratap Venugopal said, “Stock options were granted to Saluja in her capacity as an executive director/chairperson of Religare and not in her capacity as a non-executive chairperson of Care.”

The allegations, counter-allegations and the registering of an FIR against the promoters suggest REL has still not overcome its problems even though it has limped back to normal after the crippling Singh brothers controversy blew up nearly four years ago.


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