Sebi orders Religare Enterprises to apply for open offer before July 12

The Burman group acquired an additional 5.7% stake in REL in September last year triggering the open offer requirement as their stake surpassed the 26% threshold

The Securities and Exchange Board of India (Sebi) has directed non-banking financial company Religare Enterprises (REL) to apply to regulatory authorities before July 12 to seek statutory approvals necessary for an open offer by the Burman family.

The Burman group had alleged that Religare board and its Chairperson Rashmi Saluja were blocking the open offer, while Saluja had complained that the Burman family was not ‘fit and proper’ for the acquisition.

The Burman group acquired an additional 5.7 per cent stake in REL in September last year triggering the open offer requirement as their stake surpassed the 26 per cent threshold. However, REL wrote to Sebi stating that the acquirers were not ‘fit and proper’ and thus the board did not apply for open offer.

The market regulator said that REL has not submitted any documents or evidence proving the alleged infirmities.

"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 /control by the acquirers in an open offer, due to proposed change in control," said Sebi.

The norms permit only the company to file for open offer and give option to the existing shareholders for exit in case the shareholding of an entity crosses the 26 per cent limit. However, REL has stalled applying for over nine months, said Sebi.

Sebi has directed the company to apply for approval to the Reserve Bank of India (RBI), Insurance Regulatory and Development Authority of India (IRDAI), and Sebi.

Prior to the order, the market regulator had sent a letter to the REL board on May 31 asking them to apply for the open offer within 15 days.

However, REL board in a response on June 10 said that Sebi’s letter was unwarranted, without jurisdiction, and was a regulatory over-reach.

"Where there is a right there must be a remedy. Sebi would be failing in its duties if measures are not taken for enforcement of rights of various stakeholders, above all the investors," the market regulator said in the order responding to the REL’s questions on Sebi over-reaching its jurisdiction.

Sebi said that with regard to the fit and proper criteria, the allegations would be considered by each regulator when the application for open offer is made.

In the order cum show-cause notice, the market regulator has also sought response from the REL board on why no action should be taken against them for the alleged allegations.