Key investors question PIL that led to HC stay on Religare AGM

The investors disputed the premise of the writ petition filed by the individual named Vijayant Mishra, who argued that a takeover of Religare by the Burman family will concentrate the ownership of the company in the hands of a few, which is against the interests of minority shareholders.

Mint spoke with multiple investors, who collectively control about a tenth of Religare's total share capital.

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“This is a mockery of shareholders’ rights and shareholders’ democracy," said Umeshkumar Mehta, chief investment officer, Samco Mutual Fund. “Holding of the AGM has got nothing to do with RBI approval or open offer. AGM is an independent business matter," he said, adding that he was speaking on behalf of Samco fund house and not its promoters.

Samco Special Opportunities Funds holds a 1.37% stake in Religare. Separately, Samco’s promoter Modi family owns an 8.19% stake in the company through two holding companies—Chandrakanta and Quick Trading and Investment Advisors LLP.

Concentrated shareholding

“Today also the shareholding is concentrated with the Burman family. If they make an open offer, minority investors can always say no to selling their shares. If such arguments are made then no takeovers can happen in India," said a senior executive at one of the large institutional investors of Religare, asking not to be named as they are not allowed to speak to the media on matters related to any specific security.

“I am disappointed that I was not allowed to vote (at the AGM)," this executive said.

The Burman family, the promoters of consumer goods maker Dabur India Ltd, control 25.12% stake in Religare through four holding companies.

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“Due to the PIL, the AGM has been delayed. This is not a good thing for shareholders; the share price has also fallen," said Sanjay Kaul, director at FE Securities Pvt Ltd, a Delhi-based brokerage which owns just over 0.02% of the company.

Kaul argued that a takeover could be good for the company. “It is good to have a strong promoter. It could be anyone. Today, there is no shareholder director on the company’s board," he said.

“It is odd for a high court to pass such an order against Sebi and RBI regulations. The order itself didn't have any compelling logic on why an AGM, that is outlined by the Companies Act, needed to be withheld," said Shriram Subramanian, the managing director of proxy advisory firm InGovern.

HC's stay order

A division bench of Chief Justice Suresh Kumar Kait and Justice Vivek Jain of the Madhya Pradesh High Court stayed Religare’s AGM till further notice in an interim order passed on 18 December.

The AGM was scheduled for 31 December. On the agenda was a resolution seeking Rashmi Saluja's reappointment as a director on the company’s board, which would decide her future at the firm. Two leading proxy advisory firms have asked investors to vote against a fresh term for Saluja, arguing, among other things, that the takeover battle could distract the company’s board.

The AGM was originally scheduled for September, but was deferred by three months earlier this year after the company approached the Registrar of Companies seeking a postponement. The deferment was challenged by the Burmans in the Delhi High Court.

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Samco’s Mehta said the investment firm will write to relevant regulators to take appropriate steps in the interest of minority shareholders. The episode makes a case for further strengthening of the takeover regulations in India, he said.

“All options are open; we will discuss in our board meeting and take appropriate steps if there are inordinate delays in normalization of the functioning of REL," he said.

Religare Enterprises and the Burman family did not respond to queries. Mint could not reach Vijayant Mishra for comment.

The takeover battle

Religare’s management, led by chairperson Saluja and the Burman family, the company’s largest shareholders, are at loggerheads after the latter made a takeover bid for the company.

The Religare board, which initially supported the takeover, has since rejected the open offer citing low valuation and calling the Burman family not fit and proper to run a financial services firm. The Burmans had announced their open offer on 25 September 2023 at ₹235 per share, which was at a discount to the stock’s previous closing prices of ₹272.45 back then.

The two sides exchanged allegations and filed multiple lawsuits over the past 15 months as the takeover battle turned bitter.

Also read |  Religare upsets investors by delaying AGM

A fourth executive, representing a family office that is among the largest investors of Religare, said that if the board was against the takeover, they shouldn’t have initially supported it in September 2023.

“We took it as a positive sign and bought into the company," this executive said, requesting not to be named. “Now everybody is thinking about themselves and neglecting the company."

RBI, Sebi green light

Earlier this month, the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (Sebi) separately gave their nods to the Burman family to make an open offer for acquiring an additional 26% stake in Religare, clearing the path for their takeover of the company. Earlier, the Insurance Regulatory and Development Authority (IRDA), the Competition Commission of India (CCI) and the stock exchanges also approved the open offer.

However, in his petition, Mishra argued that if the open offer was allowed to go ahead, it will concentrate the control in the hands of 399 persons, defeating the interests of 73,623 minority investors holding shares worth up to ₹2 lakh, as per the court’s interim order. This category owns 10.38% of the company.

Also read |  SAT gives Religare time to comply with Sebi order in Burman open offer case

Mishra has requested the court to set up an independent commission of enquiry to oversee and acquisition. The case is expected to be listed again on 17 January.

“It is odd for a high court to pass such an order against Sebi and RBI regulations. The order itself didn't have any compelling logic on why an AGM, that is outlined by the Companies Act, needed to be withheld," said Shriram Subramanian, the managing director of proxy advisory firm InGovern.

“Any acquisition will have one or two acquirers and the consolidation of shareholders, that's how the market works."