India’s markets regulator, the Securities and Exchange Board of India (SEBI), has reprimanded Religare Enterprises Ltd’s chairperson Rashmi Saluja and its board of directors for their failure to comply with securities laws. This action comes after the Burman family initiated an open offer to acquire additional shares in the financial services conglomerate. SEBI has directed the REL board to promptly apply to the Reserve Bank of India (RBI) for necessary approvals within a week. The regulator expressed dissatisfaction with the board’s efforts to delay and obstruct the open offer process, highlighting concerns over governance and shareholder rights.
The Burmans, prominent leaders of consumer goods giant Dabur Ltd, already hold a stake of over 25% in REL. According to Indian securities regulations, they are required to complete an open offer to acquire more shares. However, Religare has resisted this, arguing that the Burmans are not “fit and proper” to take control of the company. The dispute escalated when Religare contested SEBI’s jurisdiction in this matter, claiming the regulator exceeded its authority by mandating compliance with the Substantial Acquisition of Shares and Takeovers (SAST) Regulations.
SEBI issued a notice dated June 19, stating that Religare had violated Regulation 26 of the SAST Regulations, 2011, and failed to adhere to its underlying principles. Despite SEBI’s clear directives for the board to seek regulatory approvals, Religare persisted in its stance, prompting SEBI to issue urgent directives for compliance.
Given that Religare operates in non-banking, insurance, and broking sectors, approvals are required from RBI, SEBI, and the Insurance Regulatory and Development Authority of India (IRDAI) for the open offer to proceed. The delay in obtaining these approvals has stalled the Burmans’ open offer, which was initially launched on September 25. The Burman family has steadily increased their stake in Religare over the past five years through entities like MB Finmart, Puran Associates, VIC Enterprises, and Milky Investment and Trading Co., owned by cousins Anand and Mohit Burman.
SEBI emphasized the importance of upholding shareholder rights and ensuring compliance with statutory requirements. The regulator’s intervention underscores the need for Religare to adhere to regulatory norms and facilitate a transparent process regarding ownership and governance issues within the company.
