Religare has asked the court to direct Sebi to conduct a forensic audit to unearth the facts behind the grievances raised by it and to submit to the court a detailed report on the actions taken by the capital markets regulator.
The court admitted Religare’s petition on Thursday and sought Sebi’s response. Justice Subramonium Prasad posted the matter for hearing in August.
In its petition, Religare has also requested the court to restrain the regulator from making any decision with respect to the Burman family’s open offer to Religare’s public shareholders until its complaints are investigated.
“The concerns raised in relation to the open offer and the acquirers (Burmans) are of a serious nature necessitating a comprehensive investigation as the fate of several thousand public shareholders of Religare Enterprises hangs in balance, and inaction by the Sebi to examine these prejudices the position of Religare, its shareholders and the other companies in the Religare Group, which require funding in the ordinary course of business,” said the financial services firm. Religare further said that “the Burmans, in the absence of an investigation by Sebi…, are using their shareholding to defeat genuine and bona fide resolutions of the company”. Religare & Sebi
Email queries sent to Sebi and Religare remained unanswered until the publication of this report.
The Burmans, best known as the promoter of FMCG major Dabur, first invested in Religare by subscribing to share warrants, representing a stake of about 10%. The warrants were subsequently converted into equity. They then increased their stake in Religare to about 22% and later announced to acquire 5% of the company’s shares from the secondary market and an open offer for an additional 26%.
CCI Nod In Place
While the deal including the acquisition of a 5% stake and the open offer is pending approval from the Reserve Bank of India (RBI), Sebi, and the Insurance Regulatory and Development Authority, it received the nod of the Competition Commission of India (CCI).
Soon after the CCI approval, the Burmans raised their shareholding in Religare to 25%, giving them the right to block special resolutions at the financial services company and to make an open offer for an additional 26% stake. A full subscription to the offer will give the Burmans management control of the firm.
Burmans’ move to raise the share acquisition threshold has been opposed by the existing management, which claims to have boosted the market capitalization nearly nine times to $870 million in the past six years by sorting out legacy issues.
The Burmans’ voting rights have been hindering the company’s operations, claimed the Religare petition.
“Despite the earnest efforts of Religare, there remains a glaring lack of transparency regarding the status of these representations and any action taken by Sebi on its complaints,” read the petition.
