The Reserve Bank of India (RBI) has approved the Burman family of Dabur India Ltd to proceed with an open offer to acquire an additional 26 percent stake in Religare Enterprises, The Economic Times reported on Tuesday citing unidentified sources. However, the approval comes with conditions, including maintaining the existing management structure and not appointing new directors at this stage.
The RBI clearance, granted this week, has a validity period of one year. While the nod is a significant step for the Burman family towards acquiring control of Religare, it does not include approval for proposed board changes, such as appointing directors like Arjun Lamba, Abhay Agarwal, Ramanathan Gurumurthy, and Suresh Mahalingam, according to the ET report. Additionally, fresh approval will be required if the Burman family’s shareholding falls below 26 percent.
Religare Enterprises share price gained over 2 percent on Monday to end at Rs 280.5 on NSE, ahead of the ET report. The stock has risen about 29 percent in the last one year, taking Religare’s market capitalisation to nearly 9,200 crore.
Religare open offer requires multiple regulatory approvals
The Burman family currently holds a 25 percent stake in Religare and announced plans to acquire an additional 26 percent stake for Rs 2,116 crore under SEBI's Substantial Acquisition of Shares and Takeovers (SAST) guidelines in September last year. This move would increase their total stake in the New Delhi-based NBFC to well above 50 percent, effectively giving them majority control.
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The open offer was triggered when the Burmans’ equity stake in Religare crossed the 25 percent threshold, but it required multiple regulatory approvals given Religare's involvement in insurance and financial services. While the RBI’s assent has been secured, approval from the Securities and Exchange Board of India (SEBI) is still pending. The Competition Commission of India (CCI) and the Insurance Regulatory and Development Authority of India (IRDA) have already approved the proposed open offer.
Valuation dispute and management opposition
Key hurdles to the takeover stem from opposition within Religare's management. Executive Chairperson Rashmi Saluja has raised concerns about the valuation of the open offer, arguing that the Rs 235 per share price undervalues the company. Saluja claims a fair valuation should be at least Rs 300 per share.
The Burman family initially acquired warrants equivalent to a 10 percent equity stake in Religare Enterprises in 2018. They subsequently increased their stake in the NBFC to over 25 percent in phases by September 2023, automatically triggering the SEBI-mandated open offer. The proposed acquisition is being routed through four entities associated with the Burmans: Puran Associates, Vic Enterprises, MB Finmart, and Milky Investment & Trading Company.
If successful, the acquisition could resolve the ongoing tussle for control of Religare Enterprises. However, with SEBI’s approval still pending and the RBI’s conditional nod emphasizing continuity in management, the process remains complex. In July, the Securities Appellate Tribunal (SAT) directed Religare Enterprises to file for all required regulatory approvals to facilitate the Burman Group’s open offer.
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