US investor to seek banker as Sebi ‘returns’ its Religare offer

MUMBAI: Florida-based investor Digvijay Laxmansinh Gaekwad, who has shown interest in purchasing Religare Enterprises, will need to appoint a merchant banker to comply with Sebi‘s takeover rules. After that, he will seek the regulator’s approval to make an offer for the New Delhi-based financial services company.
This comes after Sebi on Tuesday “returned” Gaekwad’s letter requesting permission to submit a competing offer to acquire 55% of Religare. In a stock exchange disclosure, Religare shared Sebi’s letter that said Gaekwad’s letter is being returned “since the same is not an exemption application in terms of regulation 11” of the takeover code. Regulation 11 empowers Sebi to grant exemptions to an acquirer from strict compliance with certain provisions of the open offer process.
The Burmans of Dabur are the largest shareholders of Religare, holding a 25% stake, and they have made an open offer to acquire an additional 26% stake from the company’s public shareholders. The Burmans’ offer, which opened on Jan 27, will close on Feb 7.
Sources have indicated that Gaekwad will need to open an escrow account and deposit a percentage of the total size of the open offer before issuing a detailed public statement. Approval from RBI is required for a foreign investor to open an escrow account.
Gaekwad has offered Rs 275 for a share of Religare, which is a 17% premium to Burmans’ offer of Rs 235 apiece. On Tuesday, the Religare stock ended at Rs 243 on the BSE. Gaekwad, who was born in India and moved to the US in 1987, has varied interests spanning cloud services, real estate, and hotels. Religare is Gaekwad’s first attempt to bid for an Indian financial services company.
Sebi rules mandate the appointment of a merchant banker to manage the open offer process.
However, Sebi’s response indicates that Gaekwad’s letter did not meet the application criteria outlined under its takeover rules. Last week, Religare disclosed that a minority shareholder had approached the Delhi high court, seeking to stop Burmans’ open offer. The shareholder owns 500 shares of Religare. The court then issued a notice to Burmans and Sebi stating that the open offer “shall be subject to the outcome” of the lawsuit.