The Burmans fail to buy more shares but own Religare anyway

First booted out of the plane, then out of the company

The highest paid executive in Indian corporate history is not on this flight.

Don’t miss the feedback poll in the middle of this post.

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There’s a bit of a weird understanding around company ownership in India. If you’re out in the market looking to take control of a listed company, sure, you should lap up as many of the company’s shares as you can. Intuitively, you would need to buy at least 51% of the company’s stock to get control. But not in India! Even if you own less than that, if the company marks you as a “promoter”, you end up effectively owning¹ the company.

There’s quite a bit of confusion and conflict around this understanding. Sometimes the founder and CEO of a company owning 10% doesn’t want to be called the promoter, but is forced to. Other times an investor who owns 17% cannot remove a promoter holding less than 4%.

Being a promoter is a state of being. You don’t need a large stake. If you’re calling the shots day-to-day, you’re a promoter. It works the other way too. If you don’t control a company just yet, but want to, you better get yourself put down as a promoter. It’s like drawing a superpower from within the soul of the company that gives you the permission and access to decide how it works.

This week, the Burman family, who are the promoters of the Ayurvedic brand Dabur, also became the promoters of Religare Enterprises, a financial services conglomerate. They were in the market to own about 51% of Religare, but their offer to buy the public’s shares failed miserably. No matter! They still own 25% of its shares, but more importantly, after a long-drawn conflict, they passed the company’s vibe check and managed to call themselves its promoters.

An offer that you can refuse

Before this week, Religare did not have a promoter. They did, once upon a time, but for the last seven years they didn’t. This isn’t a problem. There are large companies like ITC and HDFC Bank without a promoter, and all it means is that there is no one shareholder calling the shots on how the company operates. The shareholders with varying levels of ownership have some representation on the board, which then assigns the CEO, and the CEO reports to the board just as a regular employee would. (And when the CEO leaves, their son or nephew doesn’t take over.)

In September 2023, the Burmans owned ~21% of Religare, which they bought over a few years from the open market. They intended to buy 4% more and exceed 25% in total ownership. There’s a SEBI mandate around such high ownership. If you happen to own 25% of a company’s shares, you have to then offer to buy at least 26% of its remaining shares as well. The idea is that this gives you the opportunity to own a controlling stake in the company, and also gives people who may not like you the opportunity to sell their stock to you and get out.

If you’re a serious buyer, your offer to the public had better be more than the stock’s market price. We’re talking about a publicly listed company here—people can sell their shares and move on anyway. The only reason they’d sell to you is if you offered them a better-than-market price for their shares.

When the Burman family first announced their intention to run an offer, Religare’s stock price was around ₹270. The Burmans offered ₹235, a good 13% lower.

The Burmans announced the offer one-and-a-half years back, but it actually happened just last week. And it failed! They were out to buy ₹2,116 crore of Religare stock. Shareholders agreed to sell only 0.25% of that, about ₹5.4 crore.

That’s what makes the Burman family’s successful takeover a little weird. They made a shitty offer, it didn’t go through, and yet they control Religare? Tell me if being a promoter isn’t a state of being.

She does not give up

There are two things I want to mention about Rashmi Saluja, one of them totally irrelevant to this story.

1. Until last week, she was the executive chairperson of Religare.

2. She was deboarded from an Air India flight for being rude to the crew.

Saluja had been the chairperson since December 2019 (the deboarding happened last year) at a time when Religare was almost a dead company because its founders stole from the company. I don’t know how Religare turned around, but it did. Saluja had been the chairperson all this while so looks like she did a good job with it.

Religare’s stock price did prettayy well.

Saluja did not want the Burmans to take over Religare. Makes sense to me. If you’re a corporate turnaround artist at a financial services company, you wouldn’t want the company to be taken over by a billionaire family selling adulterated honey. But just how far do you go to keep your job?

Pretty far. Here’s a bit from earlier this month from the Financial Express:

The battle for control of Religare Enterprises (REL) has started looking like a never-ending soap opera. On Tuesday, Rashmi Saluja, the ousted executive chairperson of REL, made the first move by filing a fresh writ petition in the Delhi High Court, seeking to quash the open offer by the Burman family-led entities. This marks the seventh legal attempt by her to stall the takeover process. The court is expected to hear her petition on Wednesday (today).

Seventh legal attempt! Saluja does not give up.²

Fit and proper!

Religare is a holding company for a brokerage, an insurance company, and an NBFC, among other smaller businesses. For the Burman family to become the promoter, they had to get the approval of the regulator for each line of business. That’s SEBI for being a broker, IRDAI for insurance, and RBI for the NBFC.

It doesn’t make a whole lot of sense to me, but someone looking to buy a company like Religare, cannot apply directly to the regulators for approval. Instead, the company itself has to go to its regulators and say “hey this guy’s looking to buy me, are you okay if we let him run an offer for our shareholders to consider?”. The company does have some discretion here. If a potential acquirer isn’t credible, it need not go to the regulators and waste their time. But the Burmans already owned 21% of Religare, obviously had the means to buy more, so Religare didn’t really have any room for discretion.

And yet, Religare’s board, led by Saluja, decided that it did not want to take the Burmans’ offer to the regulators for approval. Apparently the Burmans did not meet the criteria that owners and executives for financial companies must be “fit and proper”.

Fit and proper? That sounds familiar. We spoke about these criteria last year when a company argued that their CEO need not be fit and proper. Here Religare is arguing that the potential buyer absolutely must be fit and proper, and that it was deciding that they were not. Surely the Burmans must be in some financial soup? No?

From a Mint report:

Members of the Dabur group have issued a rebuttal after reports linked its chairman and director to the Mahadev betting app case. The Mumbai Police has reportedly booked 32 people – including Mohit Burman and Gaurav Burman – under various sections of fraud and gambling. A spokesperson for the Burman family however dubbed it a ‘baseless’ accusation that happened to coincide with their bid to acquire Religare Enterprises.

“We have not received any formal communication on any such FIR. However, we have sighted the FIR which is being circulated to media houses. The FIR is patently false and baseless. Nothing could be further from the truth than as wrongly stated in the FIR,” the spokesperson said.

The Burmans announced that it was going to do an open offer and in a few weeks there were reports that they had an FIR registered against them in an unrelated betting scam.³ Religare used these reports to decide that the Burmans weren’t fit and proper, and wouldn’t even apply for approval to the regulators for good measure.

The Burmans then went to SEBI about this, who eventually forced Religare to actually apply for approval. This was in June 2024, a good nine months after the Burman family’s initial offer announcement.⁴

Stall, stall, stall

Every year, usually sometime between July and September, every listed company in India holds their annual general meeting. This meeting is when companies are able to get all their important shareholders in one room and have them vote on things that need their approval to go through. Shareholders can also ask the board and executives questions (or share their unsolicited opinions) about the company.

Religare’s annual meeting was scheduled for sometime in September 2024, but the board delayed it to December. From Mint:

Three institutional shareholders said they were unhappy with the decision to postpone the AGM, especially since the company has given no explanation. The delay becomes crucial as chairperson Rashmi Saluja was up for reappointment at this AGM, initially scheduled for September.

[…]

Saluja is the only non-independent director on the Religare board and, therefore, comes up for retirement at each AGM. The vote to reappoint her will now take place in December after the company secured approval to defer the AGM by three months.

Saluja needed to win the shareholder vote to be reappointed as the chairperson of Religare. This vote is usually a formality, shareholders like to go for whoever’s being presented. Saluja probably didn’t want to risk it, so the meeting was pushed.

Then in December, some random guy filed a public interest litigation (?) in the Madhya Pradesh High Court in Jabalpur—a city that Religare has absolutely nothing to do with—and the court asked to wait on the meeting scheduled for 31 December (which by itself is a weird day to hold a meeting). In January, the court finally allowed the meeting to proceed because it figured that the litigation was BS.

The meeting was then scheduled again for February, and this was challenged in court again! This time by Saluja herself in the Delhi High Court. The court refused to halt the meeting.

On 7 February, the meeting finally took place and here’s what happened:

The annual general meeting (AGM) of Religare Enterprises on Friday took an interesting turn after chairperson Rashmi Saluja stopped the discussion on her reappointment (agenda 2), stating that she was not liable to retire by rotation, said sources.

“So, we can ignore resolution number 2,” she said. When an independent director present at the meeting contested her decision, she dismissed the intervention, saying that his remarks should be taken on record.

Saluja still doesn’t give up! In the meeting, she told everyone that she wasn’t due to retire, and so there was no need for everyone to vote on her reappointment. How thoughtful of her to save everyone’s time.

Of course, that wasn’t the end of it. In the physical meeting, she managed to stop people from voting against her by making sure the vote itself didn’t happen. But voting was held online for shareholders who weren’t at the meeting and two days later 97% of Religare’s shareholders had voted against her reappointment. She was finally removed from her position as executive chairperson.

It’s a state of being

Back to the Burmans. They wanted to become the promoters of Religare and decide how it should operate. Initially, Religare’s board of directors were against this and resisted to the extent that they could. Later it was just Saluja who remained obstinate to the extent of not even letting the Burmans’ offer reach the shareholders.

Becoming the promoter isn’t just about owning a large stake. Sure, yes, more shares don’t hurt. And beyond 51% there’s not a lot anyone else can do. But with Saluja no longer a board member, there was no one to stop the Burman family from becoming a promoter. So they became the promoter! Like I said, being a promoter is a state of being.

If Saluja hadn’t been booted out, whoever knows what would’ve happened! With the Burmans’ offer practically rejected by shareholders, there is no way she would’ve let Religare name them as the promoters. Eventually, sure, the Burmans would have succeeded. But that would cost time, legal fees, and maybe a lot more money for yet another long-drawn offer.

Stay out of jail card

Why was Saluja hell bent on halting the Burmans’ offer? Maybe because she paid herself a lot! She held too much sway within the company and figured out a way to earn many multiples more than other executives at the same level. From the Economic Times:

[…] Rashmi Saluja, executive chairperson of the company, acquired around 8% stake in its wholly-owned shadow bank Religare Finvest Limited (RFL), through an Employees Stock Option Plan (Esop) award, documents reviewed by ET reveal.

The award in the unlisted subsidiary ascribed its value in a band of Rs150-260 crore. Previously, proxy advisory firm InGovern had estimated the Esops awarded to Saluja in Religare Enterprises as well as its health insurance subsidiary Care Health Insurance to be worth Rs480 crore. Together with the thus far undeclared award of stock options in Religare Finvest, the total compensation earned by Saluja via Esops could be between Rs630 and Rs740 crore. This is in addition to the annual salary and places Saluja among the highest paid executives in Indian corporate history.

Highest paid executive in Indian corporate history!⁵ Most of Saluja’s compensation came from the employee stock options pool of Religare’s subsidiaries, worth anywhere between ₹630 crore to ₹740 crore ($73m to $86m). Her stake was so high that it would represent 8% of Religare’s NBFC! The stock option pool is usually between 5–10%, meant to serve as an incentive for all employees to work to get the stock price up and stick around for longer. Saluja hogged the entire thing.

Okay, fighting to stay around as the highest paid executive in Indian corporate history would be alluring. But come on, the annual general meeting was seven days away, and she sued the company she was the chairperson at! And asked shareholders to casually ignore something they were to vote on! That’s extreme.

The Burman family have been demanding an investigation into Saluja’s compensation. If the numbers are true, and they seem to be, Saluja has almost certainly been defrauding the company and its investors. With the Burmans running the company, I wouldn’t be surprised if any documentation around her compensation reached the investigator as a neatly formatted PDF of evidence. That makes her extreme behaviour make a little bit more sense.

Cover Photo by Joerg Mangelsen/Pexels

1. I use “ownership” for promoters liberally, even though they don’t technically own the company. In everyday conversation I think the distinction doesn’t matter.

2. This better be the name of any biography that happens to be written about Saluja.

3. There’s some dumb stuff happening here that I wouldn’t even be able to scratch the surface of.

4. Religare then challenged SEBI’s ruling in the SAT, which asked it to comply. So that was another month wasted.

5. I like how the Economic Times emphasises this, but this may or may not be true! I doubt Saluja would keep getting those stock options every year for life. So not entirely accurate to count it as part of her regular compensation.