 "Burmans seek control of Religare Enterprises, make open offer to buy 26%")
The Burman family, which owns the consumer goods maker Dabur, on Monday announced an open offer to acquire up to 26 per cent in Religare Enterprises (REL) for Rs 2,116 crore, as part of its diversification strategy.
The family is looking to acquire 90.04 million shares at a price of Rs 235 per share and the offer was triggered by the family’s decision to raise its stake in the financial services company by 5 per cent.
The Burman family, through its group entities M B Finmart Private Limited, Puran Associates Private Limited, VIC Enterprises Private Limited, and Milky Investment & Trading Company currently holds a 21 per cent stake in REL, making it the largest shareholder.
The Securities and Exchange Board of India's (SEBI's) takeover rule makes it mandatory for an entity buying 25 per cent stake in a listed firm to make an open offer to buy an additional 26 per cent shares from the public (existing shareholders). The open offer rule also gets triggered if there is a change in controlling interest.
After successful completion of the offer and acquisition of shares from the market, the family's stake in REL will go up to about 52 per cent.
“The proposed transaction is in line with our vision to create a leading financial services platform that encompasses lending, broking and health insurance services,” said Anand C Burman, chairman emeritus, Dabur India.
“We are convinced that REL is the right platform and positioned for sustained success. With our guidance, REL will continue its journey to being one of India’s distinguished financial services platforms,” said Burman.
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The family reserves the right during the interim period to appoint directors to the board of directors of REL and take all measures to assume control of REL.
“We view this intention of acquisition of control in the company as a positive step reflective of the strong business platform on which the company stands. We are confident that this step will be a catalyst in strengthening the position of the company, which shall continue to achieve greater heights in the industry under the leadership and control of the acquirers,” said REL in a statement.
Shares of REL hit a 52-week high of Rs 280.30 last Thursday on the BSE. Given the offer price of Rs 235 a share, which is an almost 14 per cent discount to REL’s closing price of Rs 272.45 on Friday, the stock fell by 7.1 per cent on Monday to close at Rs 253.15. Even at these levels, the current price is 7.7 per cent higher than the offer price.
“Shareholders will not necessarily want to buy this offer and hence the statutory requirement will not be fulfilled. However, in the long term, it will be good because there is clarity on who is in the drivers’ seat,” said Ambareesh Baliga, a Mumbai-based markets analyst.
In mid-August, the Burman family had increased its stake in REL to 21 per cent from 14 per cent. Over the last two months, the stock is up almost 50 per cent.
The Burman family has been on a diversification spree in the last few years. They became promoters of Eveready Industries in July 2022 and own a 38.38 per cent stake in the company. Besides this, the family owns businesses such as Aviva Life Insurance Co, Lite Bite Foods, and Burman Hospitality, which is Taco Bell's master franchise partner in India.
“In a family business you would not want to put all your eggs in one basket and hence diversification becomes important,” said Baliga, adding: “Financial services is an important sector as far as India is concerned. Investing in the sector will be helpful for the family.”
JM Financial acted as the exclusive financial advisor to the acquirers.