The board, Ahmed said, has ‘rejected’ the offer.
“The merits of the offer are not very good. They want to replace the board and the management,” said Ahmed, also the chief executive officer of Hamdard Laboratories and chancellor of Jamia Hamdard University. “The company has come out of heritage problems. At such a time, the offer looks a bit fishy,” said Ahmed, who joined Religare’s board as an independent director two years ago.
“Yes, the board has rejected the offer. The offer price is below the share price,” he said.
To be sure, Religare Enterprises Ltd (REL) said in a statement on September 25 that the board was in support of the open offer that would have taken the Burman family’s stake beyond 51%, if fully subscribed. Subsequent weeks, however, underscored the fault lines between the board and the Burman family, with charges being traded by both parties.
When asked why he felt the timing of the open offer was suspect, Ahmed refused to divulge too many details but alluded to the movement of the company’s stock price as an indicator that things were not normal.
“In the past couple of months, the share price movement has also been suspect, which is what we have flagged to the regulators. Let the regulators decide,” he said.
Religare’s shares closed at Rs 219.25 apiece on the BSE on Tuesday. The Burmans have offered to acquire shares from the company’s existing shareholders at Rs 235 apiece. When the offer was announced in September, Religare’s shares were trading at Rs 275 apiece.
India’s takeover regulations have a provision for independent directors to give their comments on an open offer announcement made to shareholders once such an offer has been approved by the regulator. These are meant to provide shareholders with some investment-decision guidelines with respect to their existing holding in the target company’s stock.
Burmans’ Take
ET contacted Dabur India chairman emeritus Anand Burman for his remarks on the rejection of the open offer by Religare’s board.
“We have made the application to the Securities and Exchange Board of India for the open offer. They will decide,” Burman told ET.
“The board of REL does not have the power or authority to reject our offer. It only has the power to recommend the open offer to the shareholders. It is a separate matter that the shareholders have already seen the governance lapses in REL and whether the directors can be said to be discharging their duties correctly,” a Burman family spokesperson said.
The spokesperson claimed that an overwhelming majority of Religare’s shareholders were supportive of the transaction because of the credentials of the Burman family and the pricing of the offer.
“The open offer price is calculated as per the formula provided in the takeover regulations. As per this formula, the calculation comes to around Rs 221. The offer price of Rs 235, is at a premium to that price,” he said.
Religare’s board consists of six members. The board is headed by chairperson Rashmi Saluja, who has an executive role at the company. The five other members are independent directors. They include Hamid Ahmed, Malay Kumar Sinha, Praveen Kumar Tripathi, Ranjan Dwivedi and Preeti Madan. They all have non-executive roles.
Ahmed is the only independent director with a business background. The others are all retired civil servants.
Religare, originally founded by the now discredited Singh brothers of Ranbaxy fame, has found itself at the centre of a takeover battle in the absence of an unchallenged promoter holding.
The existing Religare board has complained to the stock market regulator about unusual movements in the company’s share price.
Meanwhile, the Burmans have alleged that Religare chairperson Rashmi Saluja has benefited from insider information about the family’s intention to launch an open offer. They have also alleged that her compensation from Religare is out of the ordinary.
Ahmed rejected the allegations against Saluja stating her compensation was very much in line with regulatory guidelines.
‘Replacement Decision Unwise’
“It is one company that has had legacy problems. A resolution between banks and the company has taken place at Religare Finvest,” said Ahmed. “In such a scenario, how can one seek replacement of the board and the management? The company has undergone a transformation. This is not the time for replacements.”
Dabur is a household name in the fast-moving consumer goods business, and the Burmans also have a presence in financial services through their insurance joint venture with Aviva.
The family first acquired a stake in Religare Enterprises in April 2018 by subscribing to warrants that would eventually give them a 9.9% stake in the company. The stake was acquired at a time when Religare’s former promoters, Malvinder and Shivinder Singh, were under regulatory scanner for their conduct at Religare and their hospital chain Fortis.
Gradually, the Burman family raised their stake in Religare and then announced an open offer to seek control.
Surprisingly, the board had initially supported the announcement of the open offer.
“We view this intention of acquisition of control in the company as a positive step reflective of the strong business platform on which the company stands”, Religare Enterprises had stated in the September 25 stock exchange announcement when the Burmans declared their intent to buy additional stake.