Days after advisory firm InGovern Research flagged “vested interest” of the Chairman of Religare Enterprises Rashmi Saluja, owing to excessive remuneration, and regulatory breaches at the company, sources aware of the development told The Business Guardian that Saluja was reluctant to lose control over the company that the Burmans are looking to acquire. The InGovern report accuses Saluja of receiving Rs 480 crore worth options of from REL and its subsidiary Care Health Insurance (CARE). This is over and above the compensation paid at REL, as per the report. The Burman family, promoter of the Dabur Group, which collectively now holds 21.24 per cent in REL, had, through its entities in September, announced a Rs 2,116 crore open offer to shareholders of
REL to acquire up to 26 per cent stake in the company. According to a source, initially, REL supported the open offer. “In their filing, they mentioned that this was welcome and even appreciated the Burman family for supporting the company,” a source told The Sunday Guardian, indicating violation of corporate governance on several counts. Responding exclusively to queries sent to the Dabur Group, Mohit Burman, member, the Burman family and Chairman, of Dabur India, told the Sunday Guardian, “The Burman family thinks the open offer is in the best interest of Religare and its stakeholders. It is at a fair price considering the prevailing price of Religare today is less than our offer price. The open offer price is calculated as per the formula provided in the SEBI Takeover Regulations. As per this formula, the calculation comes to around Rs 221. Our open offer price, at Rs 235, is at a premium to that price.” Burman added that as far as they were aware, “the Religare shareholders are supportive of our open offer as being in the long-term interests of Religare and its subsidiaries”.
The shares of CARE were reportedly issued to Saluja through ESOPs, without either the consent of the shareholders of REL and in disregard of the objections of the Insurance Regulatory and Development Authority of India (IRDAI). Saluja even sold some shares of Religare before the open offer was announced, the report has pointed out. While there was no response by REL to queries posted by the Sunday Guardian, a statement issued on 10 November by the Religare Spokesperson and shared with the Sunday Guardian, asserted that the ESOP exercise by employees was “conducted as per regulations and after necessary approvals”.
The statement categorically denied that the representative of the Burman family informed Saluja of the proposed Open Offer during the meeting. “The actual sale of shares that happened on 21st and 22nd September was made at prevalent market price,” the Spokesperson clarified. The Spokesperson went on to elaborate that the “process for ESOP exercise through financing and sales thereof by Saluja and other 12 employees were set in motion several days prior to the said meeting that happened on 20 September (2023) evening. “The share sale proceeds by Saluja were utilized to invest in additional ESOPs of Religare Group entity only,” as per the statement.
The matter has triggered a war of allegations with independent directors of the REL accusing the Burman family entities of fraud and other breaches, even as the Dabur promoter highlights the allegations against corporate governance issues at Religare Enterprises. “As things stand today, the Board of Religare Enterprises Limited (Religare), comprises one executive and five independent directors and there is no shareholder nominee at present. There is a need for more transparency and shareholders have the right to know about the decision-making process,” Burman told the Sunday Guardian.
Matters look to intensify as Mohit Burman informs that the family has brought to the notice of the Religare Board and the regulators certain governance issues pertaining to the trading of the shares of the company prior to the open offer announcement. “The Burman family wrote a letter to the company on 26 October 2023, as we believe this could amount to insider trading as it was done while in possession of unpublished price-sensitive information,” the Dabur Chairman stated.
On whether the Burmans have written to the Securities Exchange Board of India (SEBI) and received any response, the Dabur Chairman confirmed that the family has brought the matter to the attention of the SEBI and the stock exchanges. “The final determination has to be made by SEBI and the stock exchanges,” said Burman. Quizzed on the possibility of REL opposing the takeover, Burman pointed out, “As far as we are aware, the Religare shareholders are supportive of the open offer as being in the long-term interests of Religare and its subsidiaries.” Other than this, he added, the Burman family did not want to comment further on this matter at this juncture. “We believe the resistance from certain senior management at Religare (as opposed to the broader management/Board) is coming not because of the open offer price but because we have highlighted lapses in corporate governance,” Burman said, underlining the need for the realization that “Religare is not a personal fiefdom of a few”.
Market analysts are of the view that Religare is a good brand and there is value in the company. The Burmans having invested in the company wouldn’t want to let go of the company, setting the stage for a stiff battle.