Battle for Control: Danny Gaekwad bids to seize 55% stake in Religare, writes to REL Board

Florida-based businessman Danny Gaekwad has written to the Board of Religare Enterprises Ltd (REL) conveying his intent to launch a competing offer to the Burman Group’s open offer, which opened on Monday.

The letter, received by REL on Monday, follows Gaekwad’s communication to SEBI Chairperson on Sunday, in which he sought permission to waive certain statutory timelines under the Takeover Code. This exemption would enable him to launch a competing offer to acquire a controlling 55 per cent stake in REL.

Serious player

The letter to the REL Board reiterates the key points of Gaekwad’s earlier communication to the SEBI Chief, while also revealing his readiness to appoint a merchant banker and open an escrow account as required under the Takeover Code, according to sources close to the development. The letter emphasises that Gaekwad is a “serious player” intent on acquiring a controlling stake in REL, they added.

The letter also highlighted the specific provision (Regulation 11(1) of SAST ) that explicitly provided that SEBI does have the power under law to grant exemption on statutory timelines in the interest of public shareholders.

Also, Gaekwad’s letter is understood to have highlighted that Burman Group’s final letter of offer is silent on the conditions placed by the Reserve Bank of India in its approval and that in future this may go against the interests of public shareholders of REL if the Burman Group’s open offer were to go through without competing offer.

Value buyer

Meanwhile, Gaekwad on Monday told a TV Channel that he was a “value buyer” and that he feels REL shares are still undervalued at the stock exchanges. 

Meanwhile, sources said the competing  offer price of ₹275 per share looking to be offered by Gaekwad is clear vindication of the stance of the independent directors of REL that the Burman Group’s offer price of ₹235 per share was on the lower side. 

Proxy advisory firms

However, securities market experts and proxy advisors have mixed views on Gaekwad’s competing offer attempt with many saying that SEBI should not grant exemption from the set statutory timelines in this case. 

They see this a big litmus test for SEBI given the need for further strengthening of ties between US and India post Trump’s re-election and India’s eagerness to attract foreign direct investment from the US.

Amit Tandon, Founder and Managing Director, Institutional Investor Advisory Services (IIAS), a proxy advisory firm, said “To ensure that investors trust in markets remains high, and that the integrity of the process is maintained, it is important that the regulators ensure that mandated timelines are adhered to. We have seen the debilitating consequences of ad-hoc timelines in various insolvency cases: lenders have had to face the costs of delays”

Shriram Subramanian, Founder& MD InGovern Research, a proxy advisory firm, said this so-called competing offer by Danny Gaekwad’s associate firm lacks any credibility and genuineness. 

“The entity is neither an FPI nor has any meaningful business presence in India. One does not know the antecedent of this Gaekwad entity, the source of its funds and the ultimate beneficiary owner. This is just another ploy to derail the takeover offer by the Burman group. This attempt by Gaekwad raises more questions since the Board and management of Religare have been resisting a takeover by the Burman group,” Subramanian added.

 “As a responsible market regulator SEBI cannot allow abrupt competing offers that defy all procedure and regulations when an existing open offer is to be launched by a credible entity owning 25 per cent  shareholding.”

He said that SEBI has many grounds to reject the offer made by the Gaekwad entity.

Firstly, any competing offer has to be made within 15 days of the public announcement by the original acquirer. In this case the announcement by the Burman family was made in October 2023. After that SEBI and other regulators closely scrutinised the offer and then approved the offer by the Burman group. The Gaekwad entity had more than a year to make this competing offer. 

Secondly, any competing offer has to be made through a merchant banker and proof of funds. The Gaekwad entity has not followed any process and just written a letter to the SEBI chairman. This shows the non-seriousness of the competing offer, and raises questions on credibility of the entity, source of its funds and possibility of successfully completing the competing offer.

Thirdly, the contours of the competing offer itself are not known. If it turns out to be a conditional offer with ‘minimum acceptance level’ clause, it would derail the entire process, which may ultimately result in neither the Gaekwad entity completing the takeover nor the Burman family being allowed to complete the takeover process. “Overall, in order to preserve the integrity of capital markets and sanctity of its regulations, SEBI cannot allow frivolous offers that defy timelines and procedures”, Subramanian added.