The spat between the incoming promoters of Religare and the existing management is escalating. While the company has levelled allegations on the Burman Family ranging from fraud to their alleged involvement in with a betting app. On the other hand, the Burman Family has accused the existing management of lapses in corporate governance.
In a conversation with CNBC-TV18, Burman family spokesperson and Dabur India Chairman Mohit Burman speaks about how things went south with the current management, whether they will revise their open offer price higher and other such issues.
Here are edited excerpts of this conversation:
Q: So many allegations have been thrown your way. And now you're starting to respond to many of these. Tell us, what's the state of play as things stand right now.
A: We're focusing on the open offer. We believe that everything is above board, and sooner than later, all the regulators will give us the nod to proceed and close the acquisition.
Q: But do you believe that this is now delayed and it perhaps will continue to get delayed? Because this is not just about the open offer, but there are other allegations about proprietary etc involved?
A: No, I don't believe so. We are waiting for Competition Commission of India (CCI) approval, which we believe will come in a few weeks. After that, the Reserve Bank of India (RBI) and Insurance Regulatory and Development Authority of India (IRDAI) and, finally, the Securities and Exchange Board of India (SEBI). With some of these regulators we already work with as I'm already into insurance companies: Aviva Life Insurance and Universal Sompo General Insurance. So, I don't think we should have any problem getting the regulators’ approval.
Q: With SEBI, you have already filed a draft application. Have you heard back from them?
A: Just routine questions, which we are, on a normal basis, and nothing of any concern.
Q: Nothing about these allegations?
A: No. It's all in reference, basically, to the offer and the pricing, etc.
Q: Do you believe that these allegations, and everything else, which is happening will impact approval from the regulators? After all, this is a financial services company.
A: I don't foresee any problems because we're here. We're doing everything above board. I'm here to answer to any regulators. I'm here to provide them with any information they need. And baseless allegations will continue, mudslinging will continue. But we're going ahead and doing our job.
Q: And you have filed with the RBI and IRDAI as well?
A: I am not sure of the status. My merchant bankers, JM Financial will be able to answer those questions.
Q: The person who's running Religare, Ms Saluja, she's been at the helm of affairs for a while. And things were going well. When did things start going south in that sense?
A: We've been shareholders of Religare before Dr Saluja. We came in both the prefs (issue of preference shares) in 2018 and 2021. And, the last acquisition of the shares was done in June this year. But if you look at our history, we've been associated with the company and helping the company in difficult times. And, now to cast aspersions and saying we're not fit and proper - all the time when they required money, then we were leading the rounds, the investment rounds. So, at that time, they felt we were right. But now after the open offer, which they accepted — they put up a letter at the stock exchange — saying that they welcome us, and they will work with us, for the betterment of the company. Suddenly, they've just changed their mind.
Q: Just to go back, what caused the disruption, the rupture in that sense, in your opinion? Something went wrong.
A: Everything was fine until the chairperson needed to be voted back in. So of course, at that time, she accepted our offer and said that she will help us in getting all the permissions as well as helping us navigate getting into the business and making us understand the business. As soon as we voted her back in, now she's using all that against us.
Q: But to be clear, when the open offer did happen, did you want her to continue as the helm of affairs? What is the discussion?
A: As far as we're concerned, we don't want to upset the management as well as the board. We are professional, all our businesses are run professionally, family members only take seats on the board. And even in this case, all our discussions were centred around the fact that, at the most, we may supplement the board with some more people who can add value to the business and as well as provide capital to each of the businesses to take it to the next level. There was no question about us replacing anyone.
Q: You said right now that when she sort of understood that she perhaps will be voted out.
A: If she assumed that, I don't know why because as far as we were concerned, we wanted a smooth transition. And that's why we voted her back in.
Q: But what was the offer specifically that the executive chairperson position would be held by...
A: No, there were no negotiations about the business, and what positions anyone would hold, after the open offer.
Q: But roughly was there an indication because she would have gotten an indication from the conversation that you had? So just trying to understand - did you offer her to continue on the board?
A: Yes, absolutely. There was no discussion on any replacement. And, as far as we were concerned, we were happy to have her continue on the board. Now, as a chairperson or just as a board member, it was something which wasn't discussed.
Q: Do you also believe that instead of asking for two seats on the board, which is what I believe you did...
A: Yes.
Q: ...that also was one of the reasons why this rupture happened?
A: Could be. I mean, we were always associated with this company from 2018. We were, at many times, promised a seat on the board. But it was never taken to its conclusion. We were only asked informally but there was never any invitation or anything like that. So, we didn't even press for it at that time. It's only when we reached 21.5 percent, we just felt it was the right time to ask for two seats on the board.
Q: Why is that? Because the law allows you to ask for a board seat after 10%.
A: Yes.
Q: And of course, it's up to the board to decide, right?
A: Yes. We just felt that after reaching 21%, the money that we had put into this business was quite substantial. And, we felt that it was the right time to ask for two seats on the board.
Q: And you're saying that when you asked for two seats on the board, she accepted it?
A: She heard me out and she said she would get back, but…
Q: Because, you said the proposal was welcomed initially.
A: Yes. And so we were told that they would revert with the request. However, there was no revert on that.
Q: So, what are you doing now in terms of all these allegations? And we're not used to seeing the Burman family or Dabur as a company sort of involved in all of this, but what are you doing now to defend your interests and your position in Religare?
A: No, no. We're continuing with getting the regulatory approvals, we're continuing on meeting the shareholders. We believe all the shareholders are backing us and we believe we made a fair open offer. And, we believe that this will conclude sooner than later.
Q: You also made serious allegations about in a way insider trading against Ms Saluja. Would you talk about that?
A: No. All I can say is that it's not fair for me to judge whether it's insider trading or not. All I've made everyone privy to is that their meetings had happened and we had told them that the open offer was coming. After that shares were sold and sold at a price, which is too low or similar to the price that we've offered for the shares. The first accusation was that we are offering too low. But then, you go and sell your shares at about the same price. How do they then raise the question of my offer being too low?
Q: What you're saying is that selling shares is fine, but the point is and, of course what it implies, is also fine. But what you're saying is that something was done, which was wrong by law. I mean, it was done at a time when the window was closed in that sense?
A: Well, again, it's not for me to judge that but all I can say is that there was a meeting and they were told that there was an open offer taking place after which shares were sold. Now it's for SEBI to investigate whether that's right or wrong.
Q: And, another thing, which you're saying is that the compensation that Dr Saluja receives is, is too high and it is completely out of line with any kind of corporate compensation. You want to tell us about that?
A: It's probably not right for me to say what is high or not high. But if you look at the compensation, for a company that has no operating income, for a company that has just come out of its problems, the compensation structure looks, a little bit, not in tandem with that sort of company. I mean, first, not only is the amount of compensation, which I feel is very high but the perks, the stock options that are taken in non-executive capacity; all this comes to hundreds of crores. Now it is for the regulators to see if this is the norm, but not for me really to be able to be a judge on whether this is fair or not.
Q: CEO compensation, to be fair, I mean, that's debatable, right. There's a fair bit of criticism globally, which happens around that. But again, I mean, is this a recent phenomenon issuing ESOPs to oneself, and has the value of competition bloomed recently, that is why you are bringing this up?
A: She was brought into this company as an independent director. Within a short span of time, it went to a non-executive director, to an executive director, to an executive chairperson. And, in the last three years, the compensation structure has ballooned. Not only that, where they've been stock options granted in subsidy companies, and have been denied by the regulator, it's all been manoeuvred so that it doesn't have to go back to the regulator.
Q: And you have raised this before as well or this is the first time that you're raising this. I mean, over the years.
A: This is the first time.
Q: No, internally. I mean, in your communication with shareholders, etc. over the years, have you raised this at all previously?
A: No.
Q: This is the first time that you're raising it at any forum.
A: Yes.
Q: The other side is also kind of raising questions about whether the Burman entity is fit and proper. How would you respond to that?
A: If, after doing business in India for 140 years, and in a set of diverse businesses, we haven't made the fit and proper test… I don't believe that they have the right to judge if we are fit and proper. We've been running, if you look at the regulators, we were the first ones to get an insurance licence in 2000. We've been running insurance companies for the last 20 years. So, obviously, we meet the fit and proper tests of the IRDAI. We have non-banking financial companies (NBFCs) that meet the fit and proper tests of RBI. And SEBI itself will, in the next few weeks, decide on whether we're fit and proper.
Q: There's also the allegation that in a way, you're fronting for the erstwhile promoters - the Singh brothers. And of course, there is also the name of a spiritual leader which is thrown in?
A: I've never met any spiritual leader. They said that the money's coming… we've never bought shares, all our investments have been through preference shares. So, where is the question of buying shares from anyone? So, I totally denied and I've never met any spiritual leader.
Q: The allegation is that the money to do all of this, to invest in the company, came from that source.
A: No. If you look at the background, all our businesses are profit-making businesses, which give out enough dividends. And, all the investments we made, even in the last acquisition, we did, Eveready, all comes from our dividend payments.
Q: Are you friends with the Singh brothers.
A: No. Haven't seen him in years.
Q: And when you listen to the allegation that you're actually fronting for them.
A: Absolutely, absolutely rubbish.
Q: You know, a lot of the communication, which is coming from Religare, there is, of course, a mention of how all the independent directors on the board of Religare are sort of up in arms against what you're doing. How would you respond to that?
A: I'm yet to meet any independent director having an objection. All the communications comes from the company saying independent directors, but no independent director has raised any query, which has come out in the public.
Q: Have you made an attempt to meet some of these people?
A: We haven't made any attempt, because as I said, until two weeks ago, until about a month ago, we were welcomed (into) the company. It's only in the last few weeks that the company has become hostile. So, we haven't made an attempt as of now because we're trying to find a solution and working on an open offer at the moment.
Q: Do you feel that it was, perhaps, a bit of a mistake and oversight not to have engaged more closely with the company?
A: No, we were engaging closely with the company for the last five years. I mean, the person who was in charge of the company was meeting us on a regular basis. They never, she was always assuming charge. So, there was never a way we could actually meet anyone else or any of the other independent directors.
Q: Would you concede that under her leadership over the last couple of years, I mean, from the state of sort of floundering, the company has now actually come up to a more respectable, more steady level?
A: Of course, I wouldn't say the business but the company has come out of the troubles to a certain extent but that doesn't only take one person, I mean, the full management, the management of the subsidiary companies, the shareholders who have put in money on a regular basis. It all works in tandem for any company to come out of its problems.
Q: But you would agree that under her leadership the business of course and that's exactly why you're stuck around as shareholders.
A: I mean, of course, for the company to come out of its problems or the erstwhile promoter problems, it's commendable.
Q: But you were only in touch with Dr Saluja, not with anyone else in the company. But do you think that you should have been maybe sort of get to know the directors, you could have asked for a board seat, insisted on it perhaps much earlier?
A: No, then this would have come out much earlier if I had insisted. We were offered the board seat all the time, but it was never put into motion. How is the company like this – they are no promoters, 100% public owned, don’t even have one shareholder representative as a director? All the five directors, all nominees are by the chairperson. So, where is the question of having good corporate governance?
Q: Although to be fair, there are only I think two institutional investors. And then there is you as a larger investor, right.
A: So, no institutional investors.
Q: I'm not sure what their status is, in terms of whether they've been asked, they've been denied or whatever, they are?
A: Not only the other two, we believe all the shareholders are supporting us.
Q: But have you spoken to the two large shareholders?
A: There's always a regular dialogue.
Q: After this entire thing.
A: There is a regular dialogue.
Q: What are they telling you?
A: We believe that we have their full support.
Q: So if this were to go to some sort of a vote at some point, you think that you will come out...
A: I hope it doesn't go to that stage. But I believe that even if it does go to that stage then...
Q: So, let's just talk about the open offer price. How significant do you think that is in this entire scheme of things? Do you think it's gone beyond that? It's not about the price anymore. If tomorrow you were to raise the price, do you think things can be brought back on track?
A: No, as I said, I always believe an amicable solution can be worked out. And, I don't believe it's surprising because we're well above the SEBI price formula. If there is someone else who's willing to give a higher price then let them also come into play? I don't mind. It's not something which - we believe we've offered a fair price for the business and let the shareholders decide.
Q: Are you willing to go up?
A: At this point of time, no, I'm not because I believe it's a fair price. And I believe when the open offer does happen, we will be successful.
Q: What is the end game though? Because I mean, if this kind of stretches on because now the regulator's etc will have a statutory responsibility to investigate and that may take a while. So you sit tight with what you have and just wait it out?
A: I believe that as far as we have - we are aboveboard, and whatever questions regulators have, we will keep on giving them, furnishing them with whatever. And they will look through this whole thing. I don't believe it will take longer than normal.
Q: How long do you think this will take?
A: I'm not probably I mean, again, JM Financial will probably be the right people to answer this question. But on a normal scheme of things, I don't see it going on for long.
Q: Have any regulatory bodies reached out to you to ask for clarifications, furnish information?
A: No, at this point of time only SEBI. And, those questions are being sort of being taken care of between us and our merchant bankers.
Q: You have not met any regulators as of now.
A: No.
Q: If this were to stretch on beyond a point, and you just said that, while you will kind of furnish information and you expect this to be resolved, but if it is not, and it kind of goes on, lingers on, would you be willing to get out of the company? I mean, sell your shares and get out?
A: As I said, if the company says that we're not fit and proper and they find someone else who offers more money, may be, why not.
Q: Fair enough. What about the healthcare business, which is what most investors are excited about? We actually at CNBC-TV18 reported a story and you have been confirming that the first steps in terms of a point, reaching out to merchant bankers asking them to make a pitch, etc. for the IPO that's started. This is just last week. I was surprised.
A: It requires shareholder approval. I'm not saying that shareholder approval may or may not come but it is required. That's what I'm saying.
Q: But given everything else, which is happening, you think it's likely that we will see the care IPO sort of coming through?
A: Unless the open offer is sorted out, I doubt it will come.
Q: You said amicable solution, what is the shape and form of an amicable solution to your mind?
A: I mean, when an open offer comes, it's inevitable. The shareholders have to decide. The shareholders themselves will decide on whether my price is a fair price or not. If it's a fair price, and they tender the shares in, automatically, we will reach a level where we will have been controlled.
Q: To be fair, I must say - I spoke to one of the largest institutional shareholders, when the open offer price came through, the price was 235 and the current market price is Rs 270. The feedback that I had gotten - back then, of course, now the price is much lower - is that they would not have tendered.
A: Okay, that's fine as I said, as far as I'm concerned, if the price is too low, and shareholders don't want to tender at that price, they are welcome to. They probably believe that once the Burman family takes control, the share price will go much higher.
Q: For that the open offer has to succeed for you to take control. That's the point.
A: But we are already at 22%. Once the CCI approval comes in, we are okay to buy more shares.
(Edited by : Sriram Iyer)
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