The independent directors on the board of Religare Enterprises Ltd (REL) have taken a favourable view of the Burman’s open offer indicating a major shift in stance, according to two senior executives at the embattled listed entity.
“Once the RBI has given its approval, we must follow its directions,” said Malay Kumar Sinha, independent director, at REL.
“There is no one among the (independent) directors, who is against the directions of RBI and the Sebi Order, on AGM or open offer,” he said, adding that there is no difference in opinion among the independent directors on this matter.
On Monday, REL announced the resignation of its group compliance head Goda Mallikarjun. In his resignation letter, Mallikarjun stated that there had been an “inexplicable change in the stance of some of the independent directors” regarding regulatory correspondence.
Religare board has so far publicly come out against the Burman offer. Sinha’s comments indicate that the Burman open offer may face fewer hurdles ahead of the annual general meeting on February 7.
Welcomed initially
Initially, the Religare board had welcomed the open offer from the Burmans in September 2023, but soon turned against the acquisition. They rejected the offer on grounds of being too low and the acquirers not being “fit and proper” to run a financial services firm.
In fact, independent board member Hamid Ahmed had gone so far as to call the timing of the open offer fishy. “The merits of the offer are not very good. They want to replace the board and the management,” Ahmed said in an interview to the Economic Times in November 2023.
“Board has to be cautious”, Sinha said speaking to Mint on Monday evening, on why the board had taken a contrarian stance against the acquisition.
“Naturally, because of the company’s legacy and background, the board was cautious from the beginning. Earlier there were certain issues that were brought up to the board by the management. The board sent these issues to all the regulators, seeking an investigation. Now, the regulator has given us their view, we must comply with the regulators,” Sinha said.
Approved acquisition
The RBI, which has oversight on Religare Finvest on December 9 approved the Burman acquisition. Insurance regulator IRDAI approved the acquisition on 23 October while markets regulator Sebi approved the open offer on 23 December.
Sinha also attempted to draw a distinction between the board and the company’s comments on the RBI’s order. “Management felt that certain issues with the RBI order that are still not clear. Our advice has been for them to take it up with the RBI in person and in writing,” he said.
The Religare annual general meeting (AGM) is now scheduled for 7 February.
It was delayed for a second time from its rescheduled date of 31 December after a stay order from the Madhya Pradesh High Court. The court’s order had come following a public interest litigation filed by a lawyer in Jabalpur who argued that the open offer by the Burmans was against small shareholders of Religare.
However, the court soon lifted its stay order on grounds that the lawyer had no locus standi as he was not a shareholder of the company.
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