Forbes India 15th Anniversary Special

A murky boardroom battle shakes Religare, again

The company's board of directors is opposing a takeover bid by the Burman family on grounds of alleged fraudulent transactions, even as it shields its chairperson from serious charges of poor governance

Neha Bothra
Published: Nov 24, 2023 11:11:47 AM IST
Updated: Nov 24, 2023 11:23:20 AM IST

A murky boardroom battle shakes Religare, againMohit Burman(left), chairman, Dabur and Rashmi Saluja, who is the executive chairperson of Religare Enterprises
More than four years ago, most analysts had written obituaries of Religare Enterprises. The controversy-hit financial services company was under the scrutiny of regulators for major lapses in governance and its owners were arrested for fraud and embezzlement of funds. Somehow it rose from the ashes, as the new management steered a financial turnaround. But there’s fresh drama unfolding inside the boardroom once again.

The Burman family, promoters of FMCG company Dabur and the single largest shareholders of Religare, and Religare’s board of directors are fighting a bitter battle for control. When the Burman family announced its plan to launch an open offer to raise their holding in the company to around 52 percent, it very quickly escalated into a mud-slinging contest with serious accusations and counter accusations of misgovernance and financial irregularities.

Religare Enterprises and the Burman Group did not respond to a detailed questionnaire sent by Forbes India. The markets regulator is reviewing the matter and it remains to be seen if the Burman Group gets the green light to acquire a controlling stake in the company. However, several proxy firms and governance experts point out gaps in disclosure and regulatory compliance by Religare’s board of directors and chairperson, even as they are closely watching the developments unfold.

In an off-the-record conversation, a former executive director at the Securities and Exchange Board of India (Sebi) says he is disappointed with the conduct of the board. “All five of the independent directors are acting in consort with the chairperson without looking into the concerns raised of lapses in corporate governance,” he says.
Amit Tandon, founder and managing director, Institutional Investor Advisory Services, says that as a non-banking financial company (NBFC), sooner rather than later, Religare would require capital that the Dabur Group has offered. “If not Dabur, then the board must propose an alternative,” he adds. "At the end of the day, [the issue] is all about control, because there will be [a promoter] looking over the leadership to ensure there are checks and balances."

Shriram Subramanian, founder and managing director of proxy advisory firm InGovern agrees: “Why would a management, which holds very few shares, not want an investor to come in? They seem to be blocking the bid by the Burmans.” He says it is very uncommon for professional management with negligible shareholding to thwart a takeover bid and can’t recall any such case in India in recent times.

Also read: 'The organisation's interest must come before the promoter's': Harsh Mariwala

Battle for control

After Religare’s former owners, Malvinder and Shivinder Singh, were arrested in 2019, a new board and management took over to put the house in order and revive the business. The Singh brothers lost control of the company, following the sale of pledged shares by lenders in the face of incriminating charges of money laundering, manipulation of share price, and lack of disclosures, among others, which reportedly caused a loss of over Rs 2,347 crore to minority shareholders.

Religare’s new board comprises five independent directors and is led by Rashmi Saluja, who is the executive chairperson of Religare Enterprises and non-executive chairperson of Care Health Insurance. A doctor, lawyer, and an MBA, her LinkedIn profile says she is as an entrepreneur leading the organisation’s growth strategy: “Religare 2.0 is her vision to build a robust and integrated financial services group.” Saluja holds a 1.42 percent stake in the company.  

Over the past three years, Religare Enterprises stunned the Street with a strong improvement in its financials, and investors cheered the performance of the company as the share price rose from Rs 19 a piece in March 2020 to around Rs 272 a piece in September 2023.

Meanwhile, the Burman family, currently the single largest shareholder in Religare, bought shares from the market via various entities to inch up its holding in the company to 21.5 percent in August 2023. Two months ago, they reportedly increased their stake by 5.27 percent. As per Sebi takeover norms, this triggered the open offer clause. In September, the Burman family said it planned to invest $255 million in an open offer and buy out 26 percent from public shareholders at Rs 235 per share.

This marks the beginning of a murky tug of war between Mohit Burman and Rashmi Saluja and has put both the company’s largest shareholder and its board up for regulatory scrutiny as the Burman family and the board of Religare attack each other with allegations of corruption. In an uncanny encore of sorts, after four years, investors have been pushed to the edge, once again, as they brace for a tumultuous boardroom battle.       

The Burman family

In a statement on September 25, Religare had applauded Burman’s takeover bid as a “positive step reflective of the strong business platform on which the company stands”. However, in a quick U-turn, its board vehemently opposed the move. It reportedly wrote to the Reserve Bank of India (RBI), Sebi, and the Insurance Regulatory and Development Authority of India (IRDA), pressing charges of fraud and market manipulation against the Burman family. Saluja and the independent directors also alleged that the Burmans were colluding with the Singh brothers, the former promoters of Religare, and questioned the Burmans’ source of funds for acquisition of the controlling stake, alluding that they do not meet the fit-and -proper criteria of the banking regulator.

Following these allegations, an FIR relating to illegal betting through the Mahadev Betting app surfaced. It included the names of Mohit Burman, chairman, Dabur, and his brother Gaurav Burman, director, Dabur, and accused them of money laundering. Authorities claim the app defrauded people of nearly Rs 15,000 crore and the case is under investigation.

The Burman Group called the FIR false and baseless and said it was an attempt to block their acquisition of Religare Enterprises. “We have not received any communication on any such FIR. If this information is indeed true, it appears to be a mischievous act driven by malicious intent and is devoid of any facts. We categorically deny the allegations and firmly believe that a thorough investigation will vindicate our position and demonstrate the unfounded nature of these allegations," a Burman family spokesperson said in a media statement issued earlier. 

Also read: Small to XXL: How Dabur is resizing its FMCG business

 The Religare board

The Burmans fought back. They accused Saluja of wrongdoing and poor governance. They complained to Sebi and the stock exchanges that Saluja was guilty of insider trading because she partly sold ESOPs soon after she was informed about the open offer in a meeting. In a statement dated November 20, Religare’s board members said: “This process of liquidation of ESOPs… was set in motion several days before the said meeting that happened on 20 September.”

But proxy firms are wary of regulatory breaches and non-disclosures on part of the Religare board relating to Saluja’s ‘excessive remuneration’ and the issue of ESOPs, for example. “[This] can be seen as a clear mechanism to reward herself [Saluja] by flouting regulations and keeping shareholders of Religare Enterprises in the dark,” Subramanian notes.

In a scathing report, InGovern estimates that Saluja owned ESOPs of Religare Enterprises and its subsidiary Care Health Insurance worth over Rs 480 crore over and above her compensation. The proxy firm states that Saluja was issued ESOPs of Care Health Insurance even though IRDA rejected the proposal as it exceeded the regulatory limit of Rs 10 lakh that non-executive directors of private insurance companies are eligible to receive and would not be in line with the remuneration of other non-executive directors of Care Health Insurance.

Furthermore, there is no disclosure of the same in the annual report, and this is in disregard of mandatory disclosure norms stipulated by Sebi. Also, shareholders’ approval was not taken for ESOPs granted to Saluja (2.5 percent of Care Health Insurance’s total share capital) who was reclassified as an executive director. "Once the regulator has said no, should Saluja be eligible for the same amount of ESOPs in the insurance business by wearing a different hat? I expect we will be hearing on this from the regulator," Tandon observes.

Subramanian red flags related party transactions that raise concerns regarding true ‘independence’ of Religare’s independent directors.

On November 20, in the three-page statement to exchanges mentioned earlier, Religare’s board of directors refuted the charges: “We are shocked and disappointed by the accusations against us and our chairperson. The Religare board denies all allegations raised by certain people with vested interests,” it said.