'You can't undervalue your own company': Religare's Rashmi Saluja questions ED & SEBI on ‘baseless allegations’

Religare Executive Chairperson Rashmi Saluja

Dressed in a bright pink salwar-kameez, Dr Rashmi Saluja, Executive Chairperson of Religare Enterprises, seems calm for someone who is caught amidst a fierce takeover battle and has recently been raided by the Enforcement Directorate. Market regulator Securities and Exchange Board of India (SEBI) is investigating her for alleged violations of Insider Trading regulations. Sitting in her office at the Max House in New Delhi’s Okhla area, with a photograph in the backdrop of her with the finance minister Nirmala Sitharaman, Saluja seems unfazed as she explains the need for her to tell her side of the story. Saluja is in a high-pitched takeover battle with the 100-year-old Burman Group. Prior to September 2023, the Burmans held 21.5 percent of Religare Enterprises, in September 2023, the Burmans announced that they would increase their stake by 5.27 percent. The Burmans had proposed an open offer to buy 9 crore shares of face value of Rs 10 each at Rs 235 a piece, a price, Saluja says undervalues the company.

She insists that it isn’t about her against them (the Burmans) who have been part of the Religare turnaround story that has been scripted by Saluja in the last six years when she was called to take charge of the firm after its founders were taken to prison for allegedly diverting funds from the company. “This is a company which got out of ashes. This is a company which actually got the one-time settlement out of complete organic collections of the money. And we actually want partners who are good partners, who would believe in the thought process of the company,” she tells Moneycontrol. Are Burmans the right kind of partners? We ask. “I have no opinion, good or bad. I have no opinion on them. And why should I have an opinion on them,” she answers. In a freewheeling conversation, Saluja rebuts the allegations made against her.

SEBI's allegations: SEBI had passed an order against Religare Enterprises on June 20 saying the shareholders of the company cannot be held by existing management which 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”. This order was in the context of the open offer being declared by the Burman family to acquire controlling stake in Religare and the acquirer had complained that the board of the company did not seek requisite approval from the Reserve Bank of India regarding the acquisition.

Saluja’s response: “The entire year, the committee of independent directors in the board represented their concerns to SEBI … SEBI said why didn’t they (Religare Board) apply to the RBI regarding open offer? So what was the ask of the board? Ask of the board was the investigation into the allegations or the concerns that have been raised. Isn’t it a fair point?

If there is nothing, (SEBI) should say the board’s allegations are trash. Otherwise, you (SEBI) have a mechanism to investigate, which you do have, because when the erstwhile promoter saga was happening, SEBI appointed a forensic auditor that was needed. Why didn’t SEBI do the same and appoint forensic auditor to look into concerns expressed by the board?

A 2019 order of SEBI says that you cannot or the company cannot have any direct or indirect association with the erstwhile promoters... it looked like they might be fronting or they could be in association with the erstwhile promoters.

ED’s allegations: The Enforcement Directorate (ED) has initiated proceedings against Saluja and other board members for violating the Prevention of Money Laundering Rules (PMLA). On September 9, ED filed an FIR against Saluja and two other board members of Religare.

Saluja’s response: It is really sad that the ED has issued (notices) of PMLA violation on Employee Stock Options (ESOPs). The allocation of ESOP shares is a process that needs several approvals including a nod from the nomination and remuneration committee (NRC), the company’s board and shareholders. After getting all the required approvals, I put my money into the company. One should realise, over the last couple of years, how did Religare get liquidity? We were one of these people who actually put money via ESOPs into the company when it had no value. We wanted the company to grow.

Now, I am being told that the ED has conducted searches against one employee who didn’t even get the ESOP allotment. ED is registering a PMLA offence on a particular FIR and they conduct searches at my home and give me a clean chit, saying there is no incriminating evidence or device found and then they actually freeze the shares. And they are also calling the independent directors on that predicate offence which has nothing to do with the company, it was regarding ex-promoters of the company.

SEBI's insider trading allegations: In a show-cause notice issued against Saluja, SEBI is learnt to have made allegations that Saluja had made certain trades on September 21 and 22, 2023, just days before the open offer announcement by the Burman family for the Religare announcement, which happened on September 25, 2023. Four investment firms linked to the Burman family alleged Saluja sold 1.29 million shares worth Rs 34.71 crore on those dates after being informed about the upcoming offer by a Burman family representative on September 20.

Saluja’s response: You put insider trading allegations against me on something which is a process driven event. You are alleging that I have done insider trading because the open offer had to come to the board in September. First, you don't even tell me who are part of the meeting in SEBI while making the complaint. You say the letter has reached SEBI through a representative of the Burman family. You didn't even tell the truth that your representative was accompanied by Mr Anand Burman.

Let me ask, how do I get the shares? What is the process and does the process conclude in those two days? Nobody on the earth can do it. I have to take permission of my board. I have to then apply for the loan. Then my loan has to be approved and then the transaction should be within the window permitted for insiders under SEBI rules. It is a long process.

And why did the transaction happen? Because the maturity of the shares was coming through on September 29, and I and the other employees had to complete the transaction. We are employees and have to avail loans to finance the ESOP shares. We have to take a loan and no company is going to give you loan exactly in an hour. It's a process. So we took loan, we applied, we took permission from the board. The whole process took more than a couple of weeks. And please take a look at my documents regarding when did I apply and how long the process took. And again, the money through which these shares were purchased was brought into the company and it wasn’t even like I was getting to take away the money.

On allegations made by InGovern regarding the company’s delay in conducting AGM and corporate governance lapses.

Saluja’s response: There are proper processes in place and the AGM (Annual General Meeting) was postponed after the ROC (Registrar of Companies) approved the same. We had to explain to the ROC why the postponement was needed, and after going through our statements, they allowed our request. They approached the high court regarding the same, which was dismissed. Then they approached the divisional bench where the case is currently pending. In the meantime, a proxy advisory firm comes up with a report on the same making allegations against the company and without taking any responsibility regarding the accuracy of facts. While preparing the note the proxy advisor did not reach out to us or seek explanations from our board. But I am confident that truth will prevail.

On who is targeting her:

Saluja: So, it is quite obvious that I am getting targeted because I keep hearing and listening to the interviews of Mr Burman, Mr Mohit Burman… and you are being addressed as that woman and that person and that lady, it is definitely not a very sound thing to have said. And you have been very appreciative of the work, so much so that you wanted to take control of the company. And if you ever did feel that there was mismanagement or misappropriation, you never did raise your concern. And you have always been congratulating and sending congratulatory notes to us. You have been part of the journey, 100 percent, until September-end. You have passed each and every resolution. You have not turned down any resolution. You (Burmans) have not turned down any swap. You have not turned down any resolution for that matter of fact. In six years, every resolution was approved by you, 100 percent.

What’s the sense amongst other investors apart from Burmans?

Saluja: Let me ask you a question. Somebody who invested at a 17 or a 50 or a 60 or a 90, if your share goes all the way to 300, how would you feel?