The Securities and Exchange Board of India (SEBI) on Tuesday returned Florida-based businessman Digvijay (Danny) Gaekwad’s letter seeking permission to make a competing open offer for acquiring shares in Religare Enterprises (REL).
In an exchange notification, REL shared SEBI’s response to Gaekwad’s proposal to acquire a 55% stake at Rs 275 per share — a premium of 17% over Burmans-led entities’ offer of Rs 235 a share.
“The letters submitted by Digvijay Laxmansinh Gaekwad are being returned since the same is not an exemption application in terms of Regulation 11 of SEBI (SAST) Regulations, 2011,” the regulator said. On January 26, REL had outlined Gaekwad’s intent in a stock exchange filing.
It will be interesting to see if Gaekwad approaches the Securities Appellate Tribunal to challenge the SEBI decision. Shares of Religare Enterprises closed down 3.7% at Rs 243.05 on the BSE on Tuesday.
Speaking to media after the offer was declared, Gaekwad said his offer was not ‘out of the blue’ and he believed that the company was undervalued. He added that his attorneys and merchant bankers had begun the due diligence process and he had communicated to SEBI about his intentions. However, SEBI’s response indicates that the letter did not meet the application criteria under the SEBI SAST Regulations.
Gaekwad’s letter had stated that the Burmans’ open offer price of Rs 235 per share “grossly undervalues” the real worth of REL and is detrimental to public shareholders – a position that independent directors of REL had taken earlier.
The Burmans had objected to Gaekwad’s letter, saying that the competing offer should have been made within 15 days from the date of the public statement, which was October 4, 2023. Gaekwad’s offer came after almost 400 days.
The Burmans also argued that the letter lacked substance and bona fides, offered no indication of any source of funds, and was intended to mislead public shareholders of REL.
Last week, in a notification to the exchanges, REL said a minority shareholder had approached the Delhi High Court, and was seeking to stop Burmans’ open offer bid. Legal papers show that the shareholder holds 500 shares in Religare, and the court on January 21 had issued a notice to Burmans and SEBI and said any subsequent action —such as an open offer — “shall be subject to the outcome” of the lawsuit.
The open offer by the Burman-led entities to acquire an additional 26% of REL opened on Monday and is scheduled to close on February 7.