Opinion
L’affaire Religare: We need clarity in the haze of its takeover battle
Summary
- After allegations related to betting app Mahadev reached Dabur’s owners, the family contended it’s an attempt to thwart their bid for Religare. Although it’s a season of political intrigue, with charges flying around, the law must eventually prevail—for the sake of capital markets.
Poll-season verbal wars, with hard allegations hurled across camps, are a given in India. An illegal betting app called Mahadev recently made news as part of a political exchange of charges over a scandal under investigation, with BJP and Congress leaders accusing each other of being in cahoots with the app’s owners. The case got curiouser after its widening web cast a shadow on a business proposal. Allegations surfaced that members of the Delhi-based Dabur Group’s promoter family of Burmans, as co-owners of an Indian Premier League team, had links with a cricket betting racket allied with the scandalous app. On Tuesday, the family flatly denied any involvement and described the reports not just “false and baseless," but also as an “arm twisting" move made by “vested interests in an attempt to block the acquisition of Religare Enterprises Ltd by the Burman family." This refers to the family’s open offer to Religare’s shareholders, a buy-out drama that has unfolded since late September.
The owners of Dabur, a maker of largely desi consumer goods, have long sought to diversify into financial fields—insurance via Aviva, for example—and may have seen enough value in Religare, especially its health insurance unit, Care, to make this financial services firm a good target. It was also showing signs of recovery from its 2019 blow, when its founding duo were arrested on money-siphoning charges. But the family’s bid ran into board resistance, turning it hostile. On 25 September, the Burmans, who held over a fifth of its equity and had slowly been buying in (via board-okayed preferential allotments too), made an open offer for at least a quarter of the ownership pie, which would give them veto power on key resolutions and trigger yet another offer for a majority stake. Dabur India Chairman Mohit Burman told Mint that a new promoter (the family, i.e.) would help lift restrictions imposed by the central bank and also assure Religare access to cheaper credit for its revival as a platform. The target company’s board, chaired by Rashmi Saluja, not only dismissed the offer price as too low, but reportedly objected to the bidding party, with letters sent to regulators accusing it of fraud (rejected by Burman). Intrigue hovers over the takeover now, especially over what interests oppose it. Saluja, whose role in Religare’s return from zombie-zone has been acknowledged even by Burman, has denied that a stake reduction she made was an ‘insider’ trade, attributing it to a plan to reinvest in stock options. Meanwhile, Religare’s market price trends have stirred speculation over what she could gain through resistance. Game theory says that probable pay-offs dictate strategic choices. As for impropriety, without evidence of it, nothing can be said at this stage of any guilt or innocence.
What’s clear—or least unclear—is that while violations of law must be probed free of bias and scandals of both politics and business must be put to proper tests of justice, further blurring of these two spheres—which idealists once hoped market reforms would cleave apart—could make it harder to resolve cases to the satisfaction of neutral stakeholders, be they electorates or share-owners. Capital markets, which play a key role in how well an economy allots its funds, need clarity on law compliance to do their job. A haze mustn’t descend on cases that need to be tracked—for the rational curiosity they evoke with their enigma-wrapped riddles. It’s not rare for poll-time fare to be economical with the truth. Business mustn’t suffer the same.
