SEBI orders Religare to apply for approvals for open offer by Burmans

Further, Sebi also asked REL to constitute Committee of the Independent Directors, in terms of Regulations 26(6) of SAST Regulations, 2011, if not already constituted. The acquirers (Burmans) were willing to discharge their obligation of acquiring shares through the open offer but the target company (REL) was frustrating their efforts to do so, Sebi said.

According to Sebi, REL and its Committee of Independent Directors, vide letters dated June 10 and 11, 2024 submitted that the Sebi’s letter advising REL to make application to the RBI, Irdai and Sebi was unwarranted, without jurisdiction and resulted in a regulatory overreach as the same clashed with the powers of the board of directors of REL and the exercise of regulatory discretion by other regulators, which was best avoided. The same needed immediate reconsideration, REL said.

REL said the matter of “fit and proper person” criteria and the issue of approval for change in control, had not been examined or disposed of by Sebi and had been correctly left for the consideration of the relevant sectoral regulators.

The Burmans attempted to seek the approval of the RBI for change in control / management of REL. However, their application was not considered by the RBI on the ground that the Master Circular dated October 19, 2023 issued by the RBI permitted only the target company (REL) to make such an application, Sebi said.

Reacting to the Sebi order, a Religare spokesperson said, “As per the Sebi’s advisory, the company will apply for the fit and proper status of the acquirers for the open offer to the concerned regulators including the RBI.”

The Burmans held 21.54 per cent shares of REL. On September 25, 2023, they purchased another 5.27 per cent stake at a price of not more than Rs.235 per equity share. The market purchase order would have increased the shareholding of the Burmans beyond 25 per cent, as a result of which they were obligated to make an open offer to the shareholders of REL, the regulator said.

Burmans came out with an open offer to buy 9 crore equity shares of face value of Rs 10 each, representing 26 per cent stake at a price Rs.235 for a total consideration of Rs 2,115 crore.

Sebi said the acquirers made the public announcement for acquisition of shares on September 25, 2023, i.e. almost 9 months back. While the acquirers have repeatedly followed up with REL to obtain statutory approvals (failing which the open offer cannot proceed), REL has steadfastly refused to co-operate and in fact has acted in an apparently hostile manner, Sebi said.

“The right of the shareholders of the target company is sacrosanct and cannot ordinarily be interfered with. The exercise of said right by the shareholders cannot be held hostage to the designs of the existing management of the target company, especially in such cases where the existing management is apparently hostile to the acquirers and faces a conflict of interest in facilitating the acquisition of shares or control by the acquirers in an open offer, due to proposed change in control,” Sebi order said.

According to Sebi, under SAST Regulations, 2011, the open offer, once made, can be withdrawn only in certain circumstances, which shows that there is a necessity to provide the shareholders an exit option. “In this regard, it must be kept in mind that SEBI had only advised REL to make an application to the RBI, SEBI and IRDAI. How the said application would be processed by the RBI, SEBI and IRDAI falls entirely within the jurisdiction of the RBI, SEBI and IRDAI. It goes without saying that SEBI has no role in processing of the said application by the RBI and IRDAI,” Sebi said.