SEBI Declines Danny Gaekwad's Stake Offer Amid Religare-Burmans Dispute

On January 28, the Securities and Exchange Board of India (SEBI) rejected a request from US-based investor Danny Gaekwad to acquire a 26% stake in Religare Enterprises Ltd (REL). The financial services firm disclosed this development in a stock exchange filing.

Danny Gaekwad Developments & Investments had proposed purchasing the stake at a price higher than what was offered by the Burman family, the existing promoters. However, SEBI responded by stating, "The letters submitted by Mr. Digvijay Laxmansinh Gaekwad are being returned since the same is not an exemption application in terms of Regulation 11 of SEBI (SAST) Regulations, 2011."

Just a day before the scheduled open offer, on January 26, Religare Enterprises Ltd (REL) revealed that Danny Gaekwad Developments & Investments had expressed interest in acquiring a 26% stake in the company. This proposal came at a significantly higher price than what was being offered by entities backed by the Burman family, raising questions about the potential implications for the ongoing acquisition process.

In a letter addressed to the SEBI Chairperson—shared publicly by REL—Danny Gaekwad Developments & Investments sought permission to submit a competing open offer, arguing that investors should be given the opportunity to receive a better price for their shares.

However, the Burman Group, which has been in the process of acquiring a controlling stake in REL, dismissed Gaekwad’s move, stating that no formal competing offer had been made. The group asserted that their open offer was progressing as planned and that they remained "confident" about its successful completion.

A spokesperson from the Burman Group criticized Gaekwad’s request, stating, "The Request for Permission is entirely lacking in substance, bona fides, and offers no indication of any source of funds or even the capacity to purchase the proposed shares."

The Burman family, which has significant stakes in Religare Enterprises, has been strengthening its position in the financial services company. Their open offer for a 26% stake at ₹235 per share is part of a broader strategy to consolidate control over REL. Analysts suggest that their acquisition aligns with their long-term vision of expanding their financial services footprint.

In contrast, Digvijay Laxmansinh Gaekwad, who describes himself as a globally recognized investor, proposed acquiring REL shares at ₹275 per share—a premium of approximately 17% over the Burman Group’s open offer price. Gaekwad’s bid aimed to attract shareholders by offering a more lucrative deal, but regulatory challenges appear to have hindered his efforts.

Despite the controversy surrounding Gaekwad’s offer, market analysts believe that the Burman Group’s open offer is on track for completion. Investors are closely monitoring the situation, as the outcome could influence REL’s future ownership structure and strategic direction.

Meanwhile, regulatory experts note that Sebi’s decision to reject Gaekwad’s request underscores the importance of adherence to the prescribed takeover regulations. The rejection signals that any potential competing bid must be made within the framework of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, and must include a well-defined funding plan to be considered valid.

With Sebi rejecting Gaekwad’s request, the path seems clear for the Burman Group’s open offer to proceed as planned. However, industry observers speculate that Gaekwad could explore alternative routes to challenge the acquisition or potentially make another attempt to acquire a stake in REL through a different regulatory approach.

For existing shareholders of REL, the situation presents both opportunities and challenges. While Gaekwad’s higher bid was an attractive proposition, regulatory constraints have prevented it from materializing. As a result, shareholders will now have to decide whether to accept the Burman Group’s offer at ₹235 per share or hold onto their investments in anticipation of future value appreciation.

As the situation unfolds, investors, regulators, and market participants will be keeping a close watch on further developments in REL’s ownership battle. The final outcome could set a precedent for similar acquisition attempts in India’s financial services sector.