Sebi turns down Danny Gaekwad's plea for competing open offer for Religare

Regulator says application 'frivolous', not backed by financial capabilities; also questions due diligence of investment banker

The Securities and Exchange Board of India (Sebi) has rejected the application by US-based entrepreneur Danny Gaekwad, who sought regulatory nod to file a competing open offer for Religare Enterprises (REL).

 

The market regulator stated that granting the exemption would not be in the interest of shareholders, as it is not backed by adequate financial capability, could disrupt market dynamics, and potentially erode investor confidence.

 

In an order issued on Friday, Sebi noted that Gaekwad failed to demonstrate his ability to meet the financial obligations of the competing offer, which was proposed at ₹275 per share. The regulator highlighted that Gaekwad did not provide adequate proof of financial resources, rendering his application insincere and seemingly aimed at hindering the open offer process.

 

"In the absence of adequate proof of financial resources required for making the competing open offer, the application by the applicant does not appear to be bona fide. It seems frivolous and aimed solely at hindering the open offer process," stated Ashwani Bhatia, whole time member (WTM), Sebi, in a 10-page order.

 

Gaekwad missed the extended deadline provided by the Supreme Court to deposit ₹600 crore. Additionally, he did not apply for approvals from other financial regulators.

 

Sebi also questioned the due diligence conducted by investment bank PL Capital, noting that the banker appeared "clueless" about Gaekwad's credentials and failed to conduct proper due diligence and KYC (know your customer) before accepting the mandate. 

 

The Burmans' open offer concluded on Thursday with a mere 0.26 per cent of the total offer receiving bids. Sebi had previously too returned a letter from Gaekwad regarding his application for a counter offer of a 55 per cent stake in the financial firm. Gaekwad did not appear for a virtual hearing with Sebi before the decision on his application.

 

Sebi highlighted that allowing a competing open offer by Gaekwad would require putting the Burman group's open offer process on hold for an uncertain period. This would be prejudicial to the interests of the Burmans and shareholders who have already tendered their shares.

 

"It is important to note that the Burman group is a stakeholder in this process and, as a shareholder of the target company, is entitled to protection of its rights, just like other shareholders," the order noted.

 

Sebi clarified that the public announcement date for the open offer was September 25, 2023, not January 18, 2025, as claimed by Gaekwad. The offer price was calculated based on the norms specified under the takeover regulations. A competing open offer could only be made within 15 working days from the date of the detailed public statement made by the Burmans, which was October 4, 2023.