Religare chief broke insider trade laws: Burmans

The Burman family has alleged that Rashmi Saluja, executive chairperson of Religare Enterprises Ltd, violated insider trading laws by selling shares of the financial services company immediately before the announcement of their open offer on 25 September. A Religare spokesperson rejected the allegation, saying the sale was pre-planned.

In a 7 November letter to the Securities and Exchange Board of India (Sebi), four investment firms of the Burman family flagged Saluja’s trades on 21 and 22 September, since they had not received any response after raising the issue with the board of Religare.

“We have not received any response from the company (Religare). Neither have we been informed of any specific action the company intends to take. Given the serious nature of the issues, we request you to examine the trades in detail and take necessary action,” the letter said.

The letter to Sebi follows a previous missive to Saluja and the Religare board, where the investment firms had pointed out that she sold Religare shares worth ₹34.71 crore after being made aware of the Dabur promoters’ intention to make an open offer to Religare shareholders and assume control in a 20 September meeting with their representative, Arjun Lamba. The meeting is said to have lasted for 45 minutes.

The information was communicated to Saluja on a confidential basis in her “professional capacity as executive chairperson of the company,” read this letter to Saluja, dated 26 October. “We trust that your decision-making process regarding the aforesaid trades aligns with the high standards of market integrity associated with your role.”

The Burmans, who currently own 21.25% in Religare, announced the open offer on 25 September. An exchange filing on the same day by Religare said, “the Board believes that this corporate action is a testimony of the excellent work done by the Board and Management and is going to catalyze the next phase of growth of the Company.”

The statement also said the Burman group had always stood by the management and acknowledged that after the open offer, it will have the right to appoint Religare’s directors and make appropriate management changes.

However, things seemed to have soured later. Mint reported on 10 October that Religare’s board had commissioned an independent valuation report as it believed that the company is worth more than the price the Burman family had offered. The Dabur promoters had quoted ₹235 per share, a 15% discount to the prevailing market price.

On Thursday, The Economic Times reported that Religare’s independent directors had written to Sebi, the Reserve Bank of India and the insurance regulator alleging fraud and market manipulation by the Burmans, a charge which the latter has rejected.

“We don’t know what went wrong in the next two or three weeks that they decided to turn against (the open offer),” said Mohit Burman, chairman of the Dabur group. “We are following the law of the land and we’re doing everything above board.”

Burman also said that Religare’s charges against the Dabur promoters were an attempt to deflect attention from the alleged insider trading issue. Violating insider trading laws could lead to a person’s debarment from not only the market, but also holding any position as director or key management personnel.

In a response to Mint’s queries, a Religare spokesperson said the share sale “was set in motion several days prior to the said meeting that happened on 20 September evening. The share sale proceeds by Dr Rashmi Saluja was utilized to invest in additional ESOPs of Religare Group entity only.” The approvals for the sale were already in place before the meeting, the spokesperson said.

Saluja was not informed about the open offer in the meeting, the spokesperson said, adding that “the actual sale of shares that happened on 21st and 22nd September was made at prevalent market price.”

Saluja is often praised for driving the turnaround of Religare’s fortunes after its original promoters—Malvinder and Shivinder Singh—were arrested on grounds of fraud and money laundering at the firm in 2018.

The Burman family-owned firms include Puran Associates Pvt. Ltd, MB Finmart Pvt. Ltd, VIC Enterprises Pvt. Ltd. and Milky Investment & Trading Co., which together hold 21.25% in Religare.

The deal is yet to close and is awaiting regulatory approval.