The Reserve Bank of India (RBI) has refused to give prior permission to the Burman family for its open offer proposal for Religare Enterprises (REL). In its letter dated February 5, the regulator has stated that the proposal cannot be acceded to as the application should be submitted by the non-banking financial company (NBFC) and not the potential acquirer.

The move gains importance as it could complicate the takeover of Religare by the Burman family, the owners of Dabur India, who are embroiled in a bitter feud with the management of the NBFC.

The banking regulator has stated that the NBFC, in which change in management and control is taking place, should submit the application, sources close to the development said. It has asked the acquirers to abide by the rules that empower it to regulate (supervise and monitor) NBFCs, the sources added.

When contacted, a Burman family spokesperson told FE, “The RBI has taken note of the non-cooperation by Religare and has, in turn, directed it to make the necessary applications to the regulator.”  

The spokesperson added: “This situation once again highlights the partisan approach the board of Religare has taken which has resulted in delay of the completion of the open offer at the cost of public shareholders. Hopefully, with these directions, the board will retain its independence and fulfill its fiduciary duty of applying to the RBI.”

According to RBI regulations, NBFCs have to obtain prior written permission for acquisition or transfer of control. This includes takeover or acquisition of control of an NBFC or merger of an NBFC that would lead to transfer of more than 10% stake. RBI is the regulator with the authority on NBFCs to see whether a deal is ‘fit and proper’.

The Religare management, which is led by executive chairperson Rashmi Saluja, now has to write to the RBI for the deal to see the light of the day. This is unlikely as the REL management, which had opposed the takeover bid, is at loggerheads with the Burman family.

The spokesperson of REL was not available for comment.

On its part, the Burman family had accused Saluja of insider trading by selling shares of company immediately before the announcement of open offer on September 25.

While some legal experts said the RBI stand is more procedural in nature, others said that the Burmans have to convince the RBI and get approvals for the open offer. The regulator can direct the management to file another application. 

Apart from the RBI, Burmans also need Sebi, Competition Commission of India and Irdai approvals to complete their plans to hike stake in Religare.

In September last year, the Burman family had made an open offer to acquire an additional 26% stake in Religare through four entities — Puran Associates, Vic Enterprises, MB Finmart and Mikly Investment & Trading Company. This came after it acquired a 21% stake in REL and decided to acquire another 5% in the company, triggering an open offer.

The Burman family has raised its holding in REL over the past five years, since acquiring a 9.9% stake in April 2018. In June 2021, it had raised stake to 14%, and then bought an additional 7.5% in August 2023.

If the open offer succeeds, the Burmans will own over 53% stake in REL.