Gaekwad's Religare counter offer beyond Sebi's 15-day window: Burmans

In a statement, a spokesperson for the Burman family said Gaekwad has not made any competing open offer

(This report has been updated)  

The race to acquire diversified fintech firm Religare Enterprise Limited (REL) intensified as Dabur group promoters, the Burman family, said it was going ahead with the open offer on Monday and claimed that the counter offer made by US-based businessman Digvijay Gaekwad wasn’t valid and will not stand scrutiny of market regulator Sebi.

 

The Burman family claimed that the competing offer falls outside the 15-day window stipulated by the Sebi takeover code, following their initial offer on October 4th, 2023.

 

“In his correspondence, he has only made a Request for Permission to the Sebi seeking their permission to make a competing open offer. Gaekwad had to make the competing offer, if at all, within 15 days from the date of public statement, which was made by the Burman Group on October 4, 2023 but he did not do so,” the statement by the Burmans said.

 

The Burmans’ open offer at Rs 235 a share is opening on Monday. In a communication to the stock exchanges on late Friday evening and on Sunday, Gaekwad has sought Sebi permission to launch an all cash offer to buy 55 per cent of Religare stake from its shareholders at a price of Rs 275 a share. The entire stake buy exercise will cost Rs 5,000 crore to 65 years old Gaekwad.

 

It is a significant 17% premium above the Burman family offer of Rs 235 apiece. The stock was last trading at Rs 247.

 

“Over 400 days have now elapsed for entitling anyone to make a valid competing open offer. Regulation 20(5) of the SAST Regulations bars any competing offer after this period. So, the question of seeking permission from Sebi itself does not arise. The Request for Permission is entirely lacking in substance, bona fides, and offers no indication of any source of funds or even the capacity to purchase the proposed shares,” the Burman family spokesperson said.

 

“The fact that this purported letter, lacking any bona-fides has been disseminated by REL to the stock exchanges, without undertaking any diligence, reeks of connivance, deceit and gross recklessness amongst the executive leadership at REL. It is clearly done with the aim of misleading the public

 

shareholders of REL on whether to participate in the open offer. We are going ahead with the open offer and are confident of its successful closure,” the spokesperson of the Burman Group, said.

 

The Burmans had made the open offer after they acquired approximately 25 per cent stake in Religare. The board, however, has said the Burman offer is too low and has asked shareholders to carefully consider their options.

 

Meanwhile, legal sources said the Sebi (Securities and Exchange Board of India) may provide exemptions on the timeliness of submitting a bid under certain special circumstances as it has the authority to grant exemptions from certain provisions of its regulations, including those related to timelines.

 

Besides, in the interest of shareholders, if a company can demonstrate that a competing offer, even if submitted after the usual deadline, is in the best interest of its shareholders, then the regulator may consider granting an exemption, legal sources said.

 

The factors the Sebi may consider include superiority of the competing offer as the regulator would carefully evaluate whether it is genuinely superior to any existing offers in terms of price, terms, and conditions. The primary focus will be on whether the exemption would result in a more favourable outcome for the company’s shareholders.

 

Besides, the Sebi would ensure that the exemption does not unfairly disadvantage any particular group of shareholders. The company or party seeking the exemption would have the burden of proving that the competing offer is indeed in the best interest of shareholders and that the delay in submission is justified.

 

 

The Sebi would likely require the company to disclose the details of the competing offer and the reasons for the delay in submission to all shareholders. Each exemption request would be evaluated on a case-by-case basis based on the specific circumstances and the evidence presented by the company, legal sources said.

 

On the other hand, legal experts said even if it passes the Sebi scrutiny, the Gaekwad family’s proposed open offer may have to navigate other hurdles.

 

Under FEMA regulations, overseas ownership is capped at 30 per cent. With 10 per cent already exhausted, it leaves limited room for the US-based businessman to acquire 55 per cent, unless there is a special government intervention.

 

Legal experts note that to lend credibility to the open offer, Gaekwad must approach Sebi or make a formal announcement through a merchant banker.

 

If Gaekwad takes legal recourse it may further delay the open offer process, which already includes Burman’s pending offer, awaiting Sebi’s approval for over 15 months. 

Who is Digvijay ‘Danny’ Gaekwad?

 

US-based entrepreneur Digvijay ‘Danny’ Gaekwad has created a flutter with his open offer to acquire 55 per cent stake in Religare Enterprises, drawing some sharp reactions from Burman family -- promoters of Dabur group.

 

Burmans’ are going ahead with their open offer in their bid to take their stake to 54 per cent at Rs 235 a share (subject to acceptance of the open offer) on Monday. On the other hand, the fate of Gaekwad’s proposal of Rs 275 a share rests in Sebi’s hands.

 

As of yet, Gaekwad has not appointed a merchant banker for the offer, according to a letter addressed to the market regulator.

 

A Trump supporter, Gaekwad, 65, is the Founder-CEO of NDS USA, an information technology and cloud services company, and the founder of Danny G Management, which owns and operates various restaurants and hotels.

 

The University of Central Florida, where he is a trustee on the board, says Gaekwad also owns DG Hospitality, a hotel and restaurant management consulting company, and Danny Gaekwad Development & Investments, which oversees his real estate investments.

 

Born in Vadodara, Gujarat, Gaekwad is son of a judge and grandson of a Colonel in the Indian Army. After graduating in Political Science from Maharaja Sayajirao University of Baroda, he went to the United States in 1987 and set up several small-and medium-sized companies in diverse areas that include convenience stores, real estate development, hospitality, and information technology.

 

Over the years, Gaekwad created thousands of jobs in Florida and other parts of the United States, contributing hundreds of millions of dollars to the economy, the website says.

 

In 2016, Danny was recognised by then Florida Governor Rick Scott with the ‘One Million Jobs’ certificate of appreciation for his contribution “in helping Florida job creators add 1 million jobs between December 2010 and December 2015.”

 

Gaekwad also served in a variety of public, private and non-profit leadership roles including a Trustee of University of Central Florida Board of Trustees and executive Board Member, Enterprise Florida Board of Directors among others.