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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 quickly escalated into a mud-slinging contest with serious accusations and counter accusations of misgovernance and financial irregularities. You can read the full story here.
Alleging major lapses in corporate governance at the Mumbai-based financial services company, Mohit Burman, chairman, Dabur, tells Forbes India, “We are dealing with a person [Rashmi Saluja] who has gone all out to get ESOPs worth around Rs250 crore from an insurance company, where she is a non-executive director, without any basis after the IRDAI rejected it and without any disclosure to REL shareholders, let alone an approval from REL shareholders.”
On November 20, in a three-page media statement, 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.
The Burman family is determined to go ahead with the open offer as planned: “We believe Religare Enterprises (REL) can do more and, therefore, to provide this strategic direction, we had to make the open offer, so that our guidance and presence in the board can help increase stakeholder value. What could be a better option for a company like REL than having a promoter like Burman family backing it in its growth plans,” states Burman as he takes us through the twists and turns of the boardroom battle at Religare. Edited excerpts:
Q. You are the single-largest shareholder of Religare, but you do not have a nominee on the board. Have you discussed options with the board about appointing a nominee? We had raised this issue of having a shareholder representation in the REL board several times earlier. All shareholders had been promised seats on the board, but no one has been put on the board. Forget us, there is no shareholder representation on the Religare board even though REL is a 100 percent public shareholder-led company. This is against the basic tenets of corporate governance where the board and management are answerable to the shareholders. Q. Why are you keen to increase your stake in Religare? We believe that the open offer is in the best interest of the company. The Burman family has a strong track record in multiple business, including insurance and financial services. Having a strong promoter with a legacy like ours will help REL, which provides a comprehensive range of financial services through its subsidiaries. These services include loans for small- and medium-sized enterprises, affordable housing finance, health insurance, and retail broking. As far as we are aware, the REL shareholders are supportive of our open offer. We will proceed as per the process in the interest of all stakeholders and remain confident of completing the proposed transaction as envisaged by the Burman family.
In August 2018, we put money in REL through a preferential offer—Rs176 crore, when the company did not have money to pay salaries. Then in 2021, we again put in money, and the current management welcomed us wholeheartedly. We put in another Rs175-odd crore. We have been with the company for more than six years now. We are not new to REL. We believe REL can do more and, therefore, to provide this strategic direction, we had to make the open offer, so that our guidance and presence in the board can help increase stakeholder value. What could be a better option for a company like REL than having a promoter like Burman family backing it in its growth plans?
We have been in the financial services business, but in joint ventures, having partnered with banks and insurance companies. Therefore, our interest in REL is because it has a very strong franchise in the health insurance business. While we are already in life and general insurance businesses, we felt that this is a potential business we could add value to.
Q. Was the open offer discussed with the Religare board? Were there any objections raised? The Burman family representative had communicated the intention to make an open offer and assume control of REL on September 20, 2023, in a meeting with Rashmi Saluja. This was done to inform Rashmi Saluja in her professional capacity as executive chairperson of the company. Similarly, when the Burman family announced the open offer on September 25, the REL Board welcomed us, saying that we are the right people to lead this company. No objections were raised, as is visible in the press release of September 25. The REL board noted that the Burman family are already significant shareholders of the company. We strongly believe that the open offer and having the Burman family as promoters is in the best long-term interest of REL.
Q. Why do you believe the Religare board is now against the open offer bid [put forth by the Burman family]? As far as we are aware, REL shareholders are supportive of our open offer as being in the long-term interests of REL and its subsidiaries. We believe the resistance from certain senior management at REL (as opposed to the broader management/ board) is coming not because of the open offer price but because we have highlighted lapses in corporate governance. Q. NBFCs require a deep pool of capital to grow. Are you aware of other options being explored by the Religare board? We are not privy to such discussions, and hence not aware of any other options being explored by the REL board. That said, having a strong promoter like the Burman family will help REL (including its subsidiaries) meet the various requirements that may arise from time to time.
Q. Are you wary of governance issues at Religare based on any due diligence carried out? It is all in the public domain. The report of a proxy advisory firm speaks for itself. We will raise these issues at the appropriate forum. We are dealing with a person who has gone all out to get ESOPs worth around Rs250 crore from an insurance company, where she is a non-executive director, without any basis after the IRDAI rejected it and without any disclosure to REL shareholders, let alone an approval from REL shareholders. We will not be silent spectators at this value destruction.
Q. What led to the allegation of insider trading against Rashmi Saluja? We have highlighted various corporate governance issues at REL. First, the board of REL comprises one executive and five independent directors. There is no shareholder nominee at present. There is a need for more transparency and shareholders have the right to know about the decision-making process. Second, the Burman family has brought to the notice of the REL board and the regulators certain governance issues pertaining to the trading of the shares of the company prior to the open offer announcement. The Burman family wrote a letter to the company on October 26, 2023, as we believe this could amount to insider trading as it was done while in possession of unpublished price-sensitive information. The Burman family brought the matter to the attention of the REL board on October 26, 2023, and thereafter Sebi and the stock exchanges.
Q. Will the Burman family go ahead with the open offer given the discussions with the regulators? The open offer will proceed as per the applicable norms, approval process and other requisites, all of which are subject to regulatory approvals. Q. What legal steps are being considered currently? We reserve our legal rights against certain vested interests who have been making frivolous complaints against the Burman family members with an intent to scuttle Burman family’s move to acquire REL. We are watching the situation closely and will evaluate the next course of action in due course.
*** In the media statement mentioned earlier, Religare’s board of directors said, “Rashmi Saluja categorically denies the fact that the representative of the Burman family informed her of the proposed open offer during the meeting of 20th September... The process of liquidation of ESOPs through financing and sale was set in motion several days before the said meeting that happened on 20th September.”