NEW DELHI: After the hostile takeover of NDTV by the Adani Group earlier this year, one more corporate battle is brewing up in India Inc wherein an established business house is taking over the control of another company via the open offer mechanism.
Since the time in late September when the Burman family of FMCG major Dabur announced their intention to acquire Religare Enterprises Ltd (REL), the two sides have exchanged serious blows against each other, indicating that the whole process is not going to be a smooth affair.
The Burmans had increased its holding in REL to 21.5 per cent by August and had bought another 5.27 per cent stake in September. This triggered a mandatory open offer to buy an additional 26 per cent stake from the public shareholders to become the majority stakeholder.
A merger and acquisition expert in one of the big four consultancy firms said that prima facie it appears that the takeover is going to be a lengthy one. “The allegations levied by the two sides against each other are serious. It will come down to what material evidence they have to support the serious accusations,” the consultant added.
REL directors draw the first blood
Soon after the open offer was announced on September 25, independent directors of Religare Enterprises accused the Burman family of market manipulation following a sharp correction in REL share prices. Dabur has put forward its intention to acquire up to 90,042,541 shares at Rs 235 each. The shares were trading at Rs 270 apiece level in previous sessions.
The independent directors of REL, in a letter marked to the SEBI chairperson, RBI governor and the head of IRDAI last month, then alleged that the Burmans are in material breach of regulatory obligations, which might harm the company.
They noted that the Burman Group is involved in various “frauds and financial improprieties” which are under investigation by different statutory bodies. According to reports, the directors accused the group of colluding with the Singh brothers (erstwhile promoters of Religare), mentioned a pending case of fraud against Dabur India Chairman Mohit Burman and even questioned the source of funds used for the acquisition.
Following this, market regulator Sebi asked REL to provide evidence and documents to back the allegations made in an October 18 letter. It also sought the response of financial brokerage firm JM Financial, who are the managers of the open offer.
The Burmans hit back
The Burman family, in a detailed statement, on Thursday (November 9) said they are surprised and disappointed at these allegations and termed them false, frivolous and defamatory. “We have purchased all our shareholdings in REL through transparent market purchases and preferential allotments in prior fund-raising exercises approved by the Board of REL. There is no market manipulation whatsoever,” the statement added.
Making an explosive disclosure, the Burman family said that the allegations by the independent directors were meant to deflect attention from trades made by Religare’s Executive Chairperson, Rashmi Saluja. This trade, according to the Burmans, violates the insider trading rules.
Burmans claim that their representative met and informed Saluja on September 20th about their intention to make an open offer and assume control of the company. They said that Saluja sold 1.29 million shares worth Rs 34.71 crore on September 21-22 after a 45-minute meeting with their representative Arjun Lamba on September 20.
The Burmans also raised objections on the high compensation of Saluja, which they term is over Rs 150 crore. They said that this amount is not in line with compensation norms by any reasonable parameters.
A person close to Burmans said that the alleged Rs 150-crore compensation that Saluja received comprises ESOPs of listed and unlisted group companies.
An REL spokesperson reacted to these allegations and said: “Saluja categorically denies the fact that the representative of the Burman family informed her of the proposed open offer during the meeting. The actual sale of shares that happened on September 21 and 22 was made at a prevalent market price.”
“The process for ESOP exercise through financing and sales thereof by Dr Rashmi Saluja, Executive Chairperson, and other 12 employees was set in motion several days prior to the said meeting that happened on September 20 evening. The share sale proceeds by Dr Rashmi Saluja were utilised to invest in additional ESOPs of Religare Group entities only”, the REL spokesperson said.
The spokesperson added that the allegation of the executive chairperson drawing a remuneration of more than Rs 150 crore per annum is completely false and erroneous.
“As per the Annual Report for FY 22-23 of REL, the remuneration for the Executive Chairperson was Rs 8.12 crore. Even after including the perquisites value of the ESOPs, it reached a figure of Rs 42.06 crore, it is worth mentioning that the EC was instrumental in creating value for all the shareholders as the REL share price which saw a low Rs 17 in 2020 has witnessed a high of Rs 280 on September 23. The ESOP perquisite value is also reflective of this significant value creation, a part of which was also shared by her as a shareholder/ employee of the company,” the statement said.