Danny's offer was never real

MYSTERY POST: But what if it had been?

What a late counteroffer feels like.

The Burman family now owns Religare. To take over the company, they first announced an open offer to buy Religare’s shares from the public in September 2023. The open offer actually happened just last month though. (We’ve already seen that drama.)

Just before the Burmans’ offer went through, an Indian-origin businessman whom no one in India knew existed, Danny Gaekwad, happened to write a bunch of letters to Religare and to SEBI saying that he wanted to buy Religare instead. He apparently wanted to counter with an offer of ₹275 per share against the Burmans’ ₹235 offer.

Gaekwad’s offer was a farce. There was almost no doubt that he was a front for Rashmi Saluja, the former chairperson of Religare, who wanted to stall and stall and win the battle against the Burmans merely by attrition.¹ Gaekwad had no proof of funds, no prior interest, no shares to his name. And yet he wrote letters, appeared on as many media channels as he could, and even went to the Supreme Court because SEBI wasn’t listening to him or stalling the Burmans’ offer (justifiably).

For some bizarre reason, the Supreme Court actually gave him an opportunity! Gaekwad said he wanted to acquire 55% of Religare. To do that, he would’ve needed almost ₹5000 crore ($580 million). The Supreme Court asked him to deposit ₹600 crore ($69 million) in an RBI-designated bank account to prove that he was serious. Gaekwad was not, so he did not. He disappeared just as quickly as he had appeared. The Court wasted its time, and so did SEBI because it had to then issue an order refusing Gaekwad’s make-believe counteroffer.

This story’s done and dusted. But here’s what I’m wondering. The Supreme Court gave Gaekwad a chance. What if this was an offer not by a US-based oddball but by a private equity firm? What if this firm, let’s call it RealCo, did actually deposit that ₹600 crore?

Would SEBI then be forced to push the open offer even further? I don’t have the answer, but hey, let’s look at this hypothetical from each of the parties’ perspectives and see how they could have responded. Assuming they’re all rational and reasonably responsible, of course.

The board of directors

Religare’s board of directors would have a singular responsibility—maximising return for its shareholders. The Burman family had lowballed Religare’s shareholders by offering ₹235 per share, lower than the market price when the offer was announced.

If RealCo’s offer was legit, the board’s only consideration would be: Do the shareholders make more money? If RealCo was offering ₹275 per share—17% more than the Burmans, yes there’s more money to be made.

The board would need to go back to the Burmans and stick RealCo’s counteroffer in their face. Push them to offer more. By this point, the Burmans have already received all approvals, so they need not match ₹275. They just need to reach a sweet spot between ₹235 and ₹275 where the cost of waiting longer would exceed the benefit of the higher price.

The management

Saluja was overwhelmingly the person who represented Religare’s management.