Battle for Religare: Regulator enters the picture
The Burmans, who lead consumer goods company Dabur Ltd, have called it an insider trade and sought regulatory action. REL has said the sale was planned earlier.
In a 20 December letter, the regulator sought wide-ranging information from both REL and the Burman entities on all events leading up to the open offer and after. Mint has seen a copy of the letter.
The Sebi letter said it is investigating a case related to the “corporate announcement” dated 25 September, the date JM Financial Ltd announced the REL open offer on behalf of the Burman family.
The regulator has asked REL and the Burman family to respond with evidence about the details of events and discussions related to the proposed open offer between January and December 2023.
In its letter, Sebi has asked for “complete details of all the persons involved (from both Burman group side and REL side) in the discussion such as their complete names, their PANs, their personal and official mobile and landline numbers, emails addresses, bank account details, residential addresses during last 3 years. Same details also to be provided for their immediate relatives including spouse, children, parents, brother/ sisters and their spouses (even if PANs are not available, their names to provided) as per SEBI (PIT) Regulations.” PIT refers to Sebi’s Prohibition of Insider Trading rules.
While emails sent to Saluja and Sebi remained unanswered, a Burman family spokesperson declined to comment.
The Burmans claim their representative Arjun Lamba stated the open offer plans to Saluja in a meeting over 45 minutes at Delhi’s Oberoi hotel on 20 September. According to the Burmans, this made Saluja privy to unpublished price sensitive information (UPSI). In the next two days—Thursday, 21 September and Friday, 22 September—Saluja sold a big chunk of her REL shares for ₹34.71 crore. The REL stock was trading close to its 52-week high of ₹280 on the two days when Saluja sold the shares.
On the next trading day—Monday, 25 September—the Burman family announced an open offer worth ₹2,116 crore to take control of REL, where it holds more than 21%. The Burmans, who believe that Saluja was in possession of UPSI while she sold her shares, flagged the matter to Sebi on 7 November, stating they had not received any response after raising the issue with REL board. Mint reported the complaint on 10 November.
After selling REL shares, Saluja currently holds 1.42% in the company.
“This announcement (the 25 September open offer) itself is a privileged insider trading information if it was known in advance to Saluja or anyone else before the 25 September exchange filing. If anyone transacted in REL shares before 25 September on the basis of this information, it is a serious violation,” a veteran market advisor said on the condition of anonymity.
Under Section 15 of the Sebi Act, the regulator can impose a fine of up to ₹25 crore or three times the profit made from insider trading transactions, whichever is higher. If found guilty, Saluja could also be barred from holding any position as a director or key management personnel (KMP) in any Indian company. Saluja has been often credited for driving a miraculous turnaround of REL’s fortunes after its original promoters—the tainted brothers Shivinder and Malvinder Singh, were arrested on the grounds of fraud and money laundering at REL in 2018.
Sebi has asked both parties to provide “all relevant details of meeting held at Oberoi Hotel, New Delhi on 20 September 2023 such as the list of attendees along with proof, proof of invitation sent for meeting, details of bookings/payment made in this regard and/or any other proofs in this regard”. The regulator also called for “proofs as to whether details of open offer by the Burman group were disclosed to KMPs/designated persons of REL along with all relevant details”.
The Burman family owns at least 21.25% in REL through four entities—Puran Associates Pvt. Ltd, M.B. Finmart Pvt. Ltd, VIC Enterprises Pvt. Ltd and Milky Investment & Trading Co.
The dispute between Saluja and the Burmans has worsened after the Burman family last week alleged unfair allotment of a significant stake in Religare Finvest Ltd (RFL), a subsidiary of REL, to Saluja via stock options just a day after the open offer in the listed flagship was announced.
On 3 January, the Burman family, in a public statement, said the allotment of 8% RFL stake, which could be worth ₹150-200 crore, to Saluja will also require an investigation with regards to breach of takeover norms.
The Burmans have termed the allotment of the 21.4 million shares to Saluja as “unfortunate” since the latter merely as a solitary executive has cornered “significant quantum of remuneration through Esops” not only at RFL but also at REL and Care Health Insurance Ltd (a key REL subsidiary), all “without approval and requisite disclosure to REL shareholders”.
The Burmans said such unfair remuneration to Saluja puts a question mark on the management and the independence of independent directors and their complicity in the matter.
Shareholder advisory firm InGovern Research has valued stock options of REL and its subsidiary Care Health Insurance issued to Saluja over the past 3-4 years at over ₹480 crore, based on the shares of the two firms as per their earlier deals. Saluja’s overall compensation may be close to ₹700 crore, including REL Esops worth ₹480 crore, RFL Esops worth ₹150-200 crore and salary of ₹42 crore.
While the Burmans have criticised Saluja’s remuneration and transactions, the Saluja-led board has contended before Sebi that the Burmans are “unfit” to take over as REL promoters and that the open offer price offered by the Burmans is low.
On Tuesday, REL shares closed 1.37% lower on BSE, while the benchmark Sensex closed unchanged.
Last Thursday, the REL board called the charges by the Burman family over Esop allocation in RFL as “false claims without evidence”. REL said that at the AGM of RFL on 26 September, shareholders of RFL approved the proposed grant of Esops of RFL to Saluja under the RFL ESOP Plan 2019.
