The Burman family, promoters of Dabur India, is set to launch an open offer to acquire an additional 26% stake in Religare Enterprises Ltd (REL), a prominent non-banking financial company (NBFC). This open offer, valued at Rs 2,116 crore, will commence on January 27, 2025, and close on February 7, 2025, following regulatory approvals from the Reserve Bank of India (RBI). The Burmans, currently holding a 25.12% stake in REL through four entities, aim to increase their control over the company despite opposition from REL’s independent directors, who have raised allegations of fraud and regulatory breaches.

Open Offer Details

Scope and structure of the offer:

The Burman family, via entities such as M.B. Finmart Private Ltd, Puran Associates Private Ltd, VIC Enterprises Private Ltd, and Milky Investment & Trading Company, is offering to acquire up to 9,00,42,541 fully paid-up equity shares.
These shares represent 26% of the expanded voting share capital of REL and carry a face value of Rs 10 each.
Tentative timeline:

The open offer will commence on January 27, 2025, and conclude on February 7, 2025, providing public shareholders the opportunity to tender their shares.

Current Ownership and Acquisition Intent

Existing stake in REL:

As of September 30, 2024, the Burman family held a 25.12% stake in REL through their four entities, making them one of the company’s largest stakeholders.
Expansion strategy:

The Burman family aims to strengthen their position within the NBFC sector by increasing their stake in REL to a majority shareholding through this open offer.

Regulatory Approvals and Valuation

RBI approval:

The Reserve Bank of India provided its consent for the open offer in December 2024, clearing a critical regulatory hurdle.
Offer valuation:

The proposed offer is valued at Rs 2,116 crore, reflecting the Burman family’s significant financial commitment to gaining control of REL.

Challenges and Allegations

Opposition from REL’s independent directors:

Independent directors of REL have raised concerns regarding the open offer, alleging fraud and breaches by entities linked to the Burman family.
These allegations have led to complaints being filed with regulatory bodies, including the Securities and Exchange Board of India (SEBI), the RBI, and the Insurance Regulatory and Development Authority (IRDA).
Regulatory scrutiny:

The complaints and ongoing scrutiny from regulators may impact the open offer’s execution timeline and raise questions about corporate governance practices at REL.

Strategic Implications

Strengthening control:

If successful, the open offer will position the Burman family as the majority stakeholder in REL, enabling greater influence over strategic and operational decisions.
Sector diversification:

The Burmans, primarily known for their association with Dabur India, are expanding their footprint in the NBFC sector, aligning with their broader investment strategy that includes stakes in companies like Eveready Industries.
Market reaction:

The open offer could signal optimism for REL’s future prospects but may also face resistance from minority shareholders wary of the ongoing disputes.

Investor Action Points

Participation in the open offer:

Public shareholders of REL should carefully evaluate the offer price relative to market performance and the company’s long-term prospects before tendering their shares.
Monitor regulatory developments:

Investors must stay updated on the outcome of regulatory investigations and their potential impact on the open offer and REL’s governance.
Assess growth potential:

REL’s performance in the NBFC sector, coupled with the Burman family’s backing, could present growth opportunities, but investors should also consider the associated risks.

Better Option for Minority Shareholders

The Burman family’s open offer for an additional 26% stake in Religare Enterprises reflects their strategic ambitions to solidify control over the NBFC. While the move aligns with their broader investment strategy, allegations of fraud and regulatory breaches have introduced uncertainties. As the open offer unfolds, public shareholders and potential investors must weigh the opportunities against the challenges, considering both the potential for growth and the risks of governance concerns.