No plans to change board after Religare buy: Dabur Chairman Mohit Burman

The billionaire Burman family has no plans to change the existing Religare Enterprises (REL) board after the family office acquires a majority stake in the financial services company, Dabur India Chairman Mohit Burman said in a video call on Thursday. 

The Burman family office plans to invest additional capital in Religare’s existing lines of businesses so that it can grow the companies, Burman confirmed.

Denying the allegations made by some of the independent directors of REL that some Burman family members were named in financial scams, including in the Pandora Papers and HSBC offshore account leaks and hence do not meet the “fit and proper” criteria of the regulators, Burman said none of the family members has ever been charge-sheeted in these cases. “We have two insurance firms, 10 different businesses, and we have been in the industry for 140 years. We’ve had 18 multinational startups in joint ventures. Our businesses are under the insurance regulator and the Reserve Bank of India (RBI), and we are meeting all criteria. Now this (REL) board is doing a fit and proper test on us?” Burman asked.

The management, led by REL Executive Chairperson Rashmi Saluja, was planning an initial public offering (IPO) of Care Health Insurance, which is currently the no. 2 health insurance company. But Burman said the IPO cannot go ahead until the current issues over the open offer are resolved.

Burman said the family office has been a shareholder of REL since 2018 and participated in its two preferential issues in 2018 and 2021.

“We have collectively put in roughly Rs 380 crore to bail out the company when there was no promoter, scant management, and no money even to pay salaries. We also put in money in 2021 to pay for the one-time settlement (OTS) of the banks, and the current management and board welcomed us and gave us a glorious review,” Burman said.

The Burman family owns a 21.24 per cent stake in REL and made an open offer on September 25 to acquire an additional 26 per cent from other shareholders. The open offer would cost the Burmans an additional Rs 2,116 crore, assuming full acceptance by the minority shareholders.

But after welcoming the open offer on September 25, the board of directors of REL, led by Saluja changed its stance. It appealed to the market regulator, the Securities and Exchange Board of India (Sebi), saying the open offer made by the Burman family at Rs 235 per share is undervalued. The board also appointed two independent valuers to value the company.

After taking over the company as chairperson in 2018, Saluja helped turn around the fortunes of REL after the erstwhile promoters, the Singh brothers (Malvinder and Shivinder Singh), were accused of diverting funds from the company.

Thanks to Saluja’s turnaround plan, REL shares, which fell to as low as Rs 17 per share in March 2020, shot up to Rs 271 per share in September this year. Religare shares closed at Rs 220 per share on Thursday, giving it a total market valuation of Rs 7,230 crore.

REL has a stockbroking arm, a health insurance company (Care Health Insurance), and a non-banking financial company — Religare Finvest (RFL).

In a letter to regulators, some of the independent directors have raised the issue of whether the Burmans meet the “fit and proper” criteria of the regulators — taking into account the previous investigations faced by a few family members. Burman said they have not received any communiqué from Sebi, the RBI or the Insurance Regulatory and Development Authority of India so far on the open offer issue.

According to Burman family executives, the OTS (one time settlement) of RFL is not complete to date as ICICI Bank, which is an unsecured creditor, has not settled with the company.

“With the open offer, we come in as a credible promoter and with the change of promoter, the lending gap will automatically go away and RFL will become a viable lending entity,” an executive said.

Executives said the credit rating of REL and RFL will improve once a strong promoter comes in and helps raise capital.

“We thought this was the right time to make the open offer after five years of being there as an anchor investor. Some people want to scuttle the open offer for vested interests,” said an executive, while pointing out the high compensation structure of the top management, including employee stock ownership plans in subsidiaries and salaries.

Burman said even after the family acquired Eveready Industries, it did not change the board and maintained continuity.