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The Securities and Exchange Board of India (Sebi) has directed Religare Enterprises (REL) to apply for approvals in order to proceed with the open offer made by the Burman family. This comes as a blow to the REL management led by chairperson Rashmi Saluja.
REL will have to apply with the Reserve Bank of India (RBI), Insurance Regulatory and Development Authority of India (Irdai) and Sebi before July 12.
The REL management had blocked the open offer application by the Dabur promoters for nine months, questioning their “fit and proper” status.
“We remain committed to completing the open offer in the interest of public shareholders of Religare Enterprises,” said a Burman family spokesperson.
As per the Sebi advisory, the company will apply for the fit and proper status of the acquirers for the open offer to the concerned regulators including the RBI, a spokesperson at REL said after the Sebi order on Thursday.
Shares of REL rose nearly 4 per cent to end at Rs 233.4 apiece.
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The regulator was compelled to issue the latest order as the REL board did not pay heed to its previous letters for initiating the open offer process.
Sebi has held that any breach of the 25 per cent shareholding threshold triggers the obligation on the acquirer to make an open offer for purchase of additional 26 per cent share. “The exercise of said right by the shareholders cannot be held hostage to the designs of the existing management of the target company, especially in such cases where the existing management is apparently hostile to the acquirers and faces a conflict of interest in facilitating the acquisition of shares /control by the acquirers in an open offer, due to proposed change in control,” it said.
Entities-owned by the Burman family held a 21.54 per cent stake in REL. Four entities purchased an additional 5.27 per cent stake in September 2023 in the open market, following which they made a public announcement to launch an open offer to acquire an additional 26 per cent. Currently, the Burman family is the single-largest shareholder in REL but has no board representation.
Starting October 2023, REL board made several representations to Sebi against Burman’s move to acquire more shares on the ground that they don’t meet the ‘fit and proper’ criteria to become a promoter of a financial company with key licences for insurance, lending and broking business.
Meanwhile, Burman’s also moved Sebi complaining about the “complete absence of cooperation and support from REL” which had hindered their efforts to furnish necessary information for obtaining regulatory approval and complete the open offer process.
On May 31, Sebi advised REL to make an application to RBI, Irdai and Sebi for requisite statutory approvals.
In response to Sebi’s letter, REL’s committee of independent directors said Sebi’s advice was “unwarranted, without jurisdiction and resulted in a regulatory overreach.”
Sebi said the fit and proper criteria and REL’s allegations would be considered by each regulator while processing the open offer application.
The market regulator said that REL has not submitted any documents or evidence proving the alleged infirmities even after several opportunities provided to them.
Show-cause notices slapped
Meanwhile, Sebi has slapped show cause notices to REL, Saluja and five others asking them why they shouldn’t be barred from the securities market for alleged violation of the Regulation 4(2)(f) of the LODR norms, which deals with responsibilities of the board of directors.
Regulatory sources said Saluja is also under probe for alleged insider trading before the announcement of the proposed acquisition
