Mint Explainer: Why did Sebi issue notice to Rashmi Saluja, Religare board?

Rashmi Saluja, chairperson of Religare Enterprises has allegedly failed to comply with securities laws.
Rashmi Saluja, chairperson of Religare Enterprises has allegedly failed to comply with securities laws.


Sebi noted that any further delay by Religare in obtaining statutory approvals would harm shareholders' rights, emphasizing the need for a prompt conclusion to the open offer process

Mumbai: Markets regulator Securities and Exchange Board of India (Sebi) has expressed dissatisfaction with the failure of Religare Enterprises' board and chairperson Rashmi Saluja to comply with securities laws following the launch of an open offer by the Burman family to acquire additional shares in the financial services conglomerate.

Sebi on Wednesday noted that any further delay in obtaining statutory approvals would harm shareholders' rights, emphasizing the need for a prompt conclusion to the open offer process. The regulator has sought written assurance from the board members that they will submit applications to regulatory authorities, including the Reserve Bank of India, by 12 July, for the necessary approvals required for the open offer. Mint takes a look at what led Sebi to pass such directions against the company.

What is the open offer of the Burman family?

The Burman family owns shares in Religare Enterprises through MB Finmart, Puran Associates, VIC Enterprises, and Milky Investment and Trading Co—entities belonging to cousins Anand and Mohit Burman. As the largest shareholder in Religare now, the family has increased its holding over five years since acquiring a 9.9% stake in April 2018. In June 2021, it raised its stake to 14% and acquired an additional 7.5% in August 2023.

Also Read: What is driving the Burmans’ quest for Religare?

In September 2023, the Burman family, which owns consumer goods company Dabur India, signalled its intention to acquire another 5.27% stake in the financial services company for  407 crore, which would take their shareholding to over 26%, triggering an open offer. The Competition Commission of India approved the acquisition in January this year.

What do Sebi regulations say about open offers?

According to the Sebi (Substantial Acquisition of Shares and Takeovers) Regulations, for any acquisition, an acquirer has to make an open offer for the purchase of shares from shareholders. Such an offer is to be made if such acquisition would entitle the acquirer to exercise 25% or more shares in the target company. 

Such an obligation gives rise to the rights of such shareholders, particularly the public shareholders of REL, to tender their shares in the open offer. These regulations provide an exit option to shareholders in case of a change in management or control of the target company. The Burman family cannot proceed with the open offer and shareholders would not have the option to tender their shares without statutory approvals from regulators like RBI, Irdai and Sebi. Importantly, the right to file such an application lies with Religare Enterprises and not the Burman family.

Why has REL not applied for statutory approvals so far?

Following the open offer, the committee of independent directors of REL made representations to Sebi against the Burman family. It said that the Burman family needs to be checked for being ‘fit and proper’ to acquire the shares.

The company further alleged that Sebi should have decided the objections REL had raised against the acquisition before considering the open offer issue. It said Sebi could not advise REL to apply for regulatory approvals.

How has the Burman family responded to REL’s allegations?

The Burman family countered that REL was not cooperating, hindering efforts to obtain regulatory approvals needed to complete the open offer process.

It stated that since REL declined to apply for approvals as directed by Sebi through several correspondences, the Burman family took the initiative to approach Sebi and RBI. However, regulators did not consider their applications, citing that it was REL's responsibility to apply.

The Burmans have also criticised the Religare board and its chairperson Rashmi Saluja over compensation and stock options.

What has Sebi now decided?

Regarding jurisdiction: Sebi emphasized that decisions affecting shareholders must have their consent. According to Sebi's order, REL's refusal to pursue statutory approvals from regulators was deemed contrary to corporate governance principles. The regulator reiterated its duty to safeguard shareholder interests and oversee the securities market. Any assertions that Sebi lacked jurisdiction to advise REL on seeking approvals were “misplaced" and reflective of REL’s “contempt for regulatory bodies".

On REL’s allegations against the Burman family: Sebi clarified that its role was merely advisory, asking REL to submit applications to relevant authorities, which would independently assess and process them. 

Also Read| Battle for Religare: Regulator enters the picture

“How the said application would be processed by the RBI, Sebi and Irdai falls entirely within the jurisdiction of RBI, Sebi and Irdai. It goes without saying that Sebi has no role in processing of the said application by RBI and Irdai. The said authorities are free to examine the fit and proper status of the applicant or any other criteria within their regulatory ambit," the Sebi order said.

The regulator also pointed out that REL had failed to provide any documentary evidence to support its allegations that Burman family was not fit and proper.

On the approval process: Sebi also reprimanded REL for not adhering to the share acquisition procedures despite making a public announcement nine months earlier.

“The target company cannot be allowed to impinge on the rights of the shareholders and their fate cannot be left hanging in balance. Sebi is left with no other option but to issue urgent directions to REL board to take appropriate steps in this regard," the regulator said in its order.  


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