NEW DELHI: All may not go well for the Burmans of FMCG major Dabur, who are looking to acquire a majority stake in financial firm Religare Enterprises Ltd (REL). After the Burmans in late September announced via a brokerage firm that an open offer is triggered as their shareholding has surpassed the 25% mark, it is learnt that the current management of Religare has approached the market regulator SEBI as there is dissatisfaction over the valuation of the company and share price offered under the open offer.
A source aware of the development said that it is highly probable that the present takeover of REL has been carefully planned by the Burman Group.
“The Burman Group acquired about 7.5% of REL shares in August 2023 to trigger an open offer. It is believed that the Burman Group has persuaded various persons to purchase shares of REL, then sell the shares after the public announcement of the open offer on September 25, and later purchase at the proposed open offer price of Rs 235. This was done in order to ensure that the value of the scrip, which was Rs 271.55 per share on September 22, drops consistently to the proposed offer value Rs 235 per share,” the source said. REL shares had hit a 52-week high of Rs 280.30 on September 21.
This, according to the source, needs to be examined if everything is under the guidelines as it is also against small shareholders’ interests. The source added REL may approach other avenues such as the exchanges and the RBI.“In general, the share price of an acquiring company goes up after a small correction. In a few instances, there is not even a correction as shareholders see a value in the stock and remain invested. However, in the case of REL, after the public announcement, the shares have been a continuing downward movement,” the source said.
Owing to this downtrend, the market capitalisation of REL has come down to Rs 7,723 crore on October 13 from Rs 8,796 crore on September 24. Eyeing to increase its presence in the financial space, the Burman family of Dabur on September 25 announced acquiring a majority stake in the diversified financial services group Religare Enterprises. If successful, the Burmans will have a controlling stake in a $1 billion valued company that competes directly with Bajaj Finance and Mukesh Ambani’s Jio Financial Services.
Four Burman family companies have made an open offer to acquire a 26% additional stake in Religare for Rs 2,116 crore. In an exchange filing made on Monday morning, Dabur has put forward its intention to acquire up to 90,042,541 shares at Rs 235 each, a steep discount from September 22 market price.
Shriram Subramanian, founder of proxy advisory firm InGovern, says there is nothing wrong with Burmans wanting to take over the company. “As such the management seems to be differing on the valuation, but that is for minority investors to decide whether to tender or not. Management doesn’t want a dominant shareholder and that is one reason they are opposing an incoming shareholder,” says Subramanian
Amidst this takeover buzz, Ventura Securities last week initiated coverage on REL shares with a buy call and a target price of Rs 471, indicating an upside of over 100% from its current market price of Rs 235-240.
Ventura noted that REL is firing on all fronts and is poised for robust financial growth and valuation re-rating in the near future. It added that REL’s health insurance arm has industry-leading margins and strong operating metrics, while its affordable housing finance and SME lending divisions are embarking on a new growth phase.
“Over the period of FY23-26E, we are expecting REL’s consolidated revenues to grow at a CAGR of 20.1% to Rs 8,096 crore, which would be primarily driven by 35.7%. Compound annual growth rate (CAGR) growth in RFL’s revenue to Rs 305 cr due to the expected rise in its SME loan book from Rs 711 crore in FY23 to Rs 2,500 crore by FY26,” said Ventura. It also believes that the company would do better under the strong and proven management of Burmans.