The long, arduous battle between the Burman family, owners of consumer goods major Dabur India, and the management of Religare Enterprises reads like the plot of a book or TV show. A corporate takeover bid that is opposed by the management, with multiple twists and turns, replete with allegations and counter allegations, and even a rival takeover bid from a foreign investor.
The nearly 18-month-long saga since the Burman family made a Rs 2,116-crore open offer for 26% of Religare shares to take their holding beyond the 50% mark seems to have come to a conclusion. On February 20, the Burman Group announced it had acquired control of Religare and had been designated as the promoter of the company.
The offer was triggered automatically after the Burman family had incrementally increased its shareholding in the company over the years to 25%.
With the Burman family finally in the driver’s seat at Religare-which has four businesses: health insurance, SME lending, capital market broking and affordable housing finance-it is looking to act quickly to put the past behind it and grow the company.
Indeed, it needs to bring a measure of stability to a firm that has been embroiled in trouble intermittently for more than a decade now. Its original promoters, Malvinder and Shivinder Singh, were accused of diverting funds in a group subsidiary between FY14 and FY18, leading to their arrest. Rashmi Saluja (pictured) was brought in as a non-executive independent director by the end of 2018 and became Executive Chairperson a year later as the firm sought to overcome its troubles. Around that time, the Burman family, through their group entities, began buying Religare’s shares in the open market and by September 2023 increased their holding to 25%.
The offer the Burmans made, at Rs 235 a share (which represented a discount over the then prevailing price of Rs 272.4), hit a dead end when the then Religare management, headed by Saluja, did not seek clearances, even as capital markets regulator Securities and Exchange Board of India (Sebi), through an interim order-cum-show-cause-notice, directed them to proceed with it. There was also a late bid from US-based investor Digvijay “Danny” Gaekwad at a price of Rs 275 per share. Sebi rejected it, calling it “frivolous.” This paved the way for the Burman takeover.
The matter appears to have been put to rest on February 13, when Religare said Saluja “ceased to be Executive Chairperson and Director” following a shareholder vote a week before that.
Shriram Subramanian, Founder and Managing Director of InGovern Research Services, a corporate governance advisory firm, says the company’s path is clear now. “Now, the four independent directors should appoint a full-time CEO or MD, whose appointment will be ratified by the shareholders.”
Subramanian says the limited participation in the Burmans’ open offer-just 0.07% of the share capital-does not matter, since they “can always increase their shareholding through creeping acquisition or through a voluntary open offer at a price greater than the market price.” On February 21, a day after the Burman family were named promoters, the Religare stock jumped more than 15% to close at Rs 256.49 apiece.
According to Sameer Kamdar, CEO of Smart Money, it is logical to expect the independent directors to invite the Burmans to join the company’s board. “Since the Burmans now hold more than 25%, it is likely that they will have at least two to three members on the board to make sure there is balanced representation,” he says.
Kamdar says there is a need for fund infusion in Religare. “The Burmans should do that quickly to protect future growth from stalling in this highly competitive environment.” To Subramanian, Saluja’s exit and changes in the board are big positives for the company’s future.
Though the issue has been resolved, Kamdar feels it has come at a very steep price for minority shareholders. “They have been caught in the crossfire between Saluja and the Burmans. Their interests need to be addressed quickly.”
Religare holds a 62.8% stake in Care Health Insurance, which has shown growth for a while but needs cash now and quickly. “In terms of valuation, Religare’s holding quotes at a significant discount to peers like Niva Bupa and Star Health. In that sense, value unlocking can be expected in the near future,” says Kamdar.
The big advantage for the Burmans is that they acquired a ready-made business. “It takes time to build one and a lot of things are in place,” says Vinit Bolinjkar, Head (Research) at brokerage Ventura Securities. Specifically on Care Health, his view is that the platform is good; plus, it is cash positive. “Religare’s businesses have a good network, and all regulations are in place. A potential investor will be interested since the clouds have cleared and there is certainty now,” he adds.
A spokesperson for the Burmans says the immediate priority is to instill stability, strengthen governance and drive sustainable growth.
“From a legal standpoint, unless Saluja can demonstrate procedural irregularities in her removal, she faces significant challenges in altering the current situation. The Burmans’ assumption of control appears to be imminent,” explains Amit A. Tungare, Managing Partner at Asahi Legal.
Religare Enterprises is set to embark on a new journey.
@krishnagopalan