Market regulator Securities and Exchange Board of India (SEBI) has rejected an application by US-based Digvijay (Danny) Laxhamsinh Gaekwad, seeking permission to make a competing open offer for a 26% stake in Religare Enterprises Ltd (REL). SEBI's decision comes amid an ongoing takeover attempt by the Burman group, which has been embroiled in legal and regulatory challenges. Last month, SEBI rejected Mr Gaekwad's offer, saying that it did not meet necessary requirements.
In
an order, Ashwini Bhatia, whole-time member (WTM) of SEBI, says, "As of the date of this order, the applicant (Mr Gaekwad (Danny Gaekwad Developments & Investments, Florida)) has failed to deposit Rs600 crore, as directed by the Supreme Court of India vide its order dated 7 February 2025 read with order dated 12 February 2025, which would have shown the applicant's commitment towards making the competing open offer. In the absence of adequate proof of financial resources required for making the competing open offer, the application by the applicant does not appear to be bonafide. It seems frivolous and aimed solely at hindering the open offer process."
"The right of a bonafide applicant to make an independent open offer is not curtailed in any manner. Given the same, at this stage, it does not seem appropriate to allow competing open offer by the applicant, only on the ground that the price offered by the applicant is more than the price offered by the Burman group," the SEBI WTM says.
According to the SEBI order, despite rescheduling a personal virtual hearing, Mr Gaekwad failed to attend the hearing on Friday morning. However, Uday S Patil, executive director and Nipun Lodha, director of PL Capital Markets Pvt Ltd were present during the hearing.
Questioning the role of PL Capital Markets, the merchant bankers of Mr Gaekwad, Mr Bhatia says, "The applicant paid the application money days after submitting the application and that too after a query was made in this regard by SEBI. The merchant banker, during the hearing today, appeared clueless about the credentials of the applicant and was found to have failed to do proper due diligence and know-your-customer (KYC) of his client before accepting the mandate."
"I am of the view that the grant of exemption sought by the applicant would not be in the interest of the shareholders. A competing offer, which is not backed by financial capability would disrupt market dynamics and erode investor confidence. In view of the above, I do not deem it fit to grant the exemptions, as sought by the applicant," the SEBI WTM says.
On 24 January 2025, Mr Gaekwad, through his investment firm Danny Gaekwad Developments & Investments (Florida), expressed interest in making a competing offer for 55% of REL's outstanding equity at Rs275 per share. SEBI initially returned the request, as it did not conform to the Substantial Acquisition of Shares and Takeovers (SAST) Regulations, 2011. A formal application was later submitted on 1 February 2025.
While Mr Gaekwad sought permission to launch his bid, a petition filed by a REL shareholder, Sapna Govind Rao, also sought a stay on the Burman group's offer. The Delhi High Court (HC) refused to halt the process but directed SEBI to review Mr Gaekwad's application. The matter escalated to the Supreme Court, which, on 7 February 2025, instructed Mr Gaekwad to deposit Rs600 crore by 12 February 2025 to demonstrate financial capability.
Despite the court's directive, Mr Gaekwad failed to make the required deposit. SEBI subsequently reviewed his application and found that:
- The timeline for making a competing offer had already lapsed, as per the SAST Regulations.
- Allowing a competing bid at this stage would disrupt the acquisition process and harm shareholders who had already tendered shares.
- Gaekwad had not demonstrated adequate financial backing to support the offer.
With SEBI's decision, the Burman group's open offer is set to proceed without interruption. The Burman family holds a 21% stake in REL through MB Finmart, Puran Associates, VIC Enterprises and Milky Investment & Trading.
The open offer to the public shareholders was at Rs235 per equity share aggregating a total consideration of Rs2,116 crore assuming full acceptance of the open offer, subject to the terms and conditions mentioned in the public announcement dated 25 September 2023 and to be set out in the detailed public statement and the letter of offer that are proposed to be issued in accordance with the SEBI SAST Regulations.
The proposed combination envisages the acquisition of 5.27% of the total issued and outstanding equity share capital of Religare through open market purchases and an open offer for up to 26% of the total expanded voting share capital of Religare under the provisions of the SEBI (SAST) Regulations, 2011. (
Read: Burman Family's Open Offer for Religare Enterprises Cleared by RBI)
As the takeover drama unfolds, REL's shareholders and market watchers will be keenly observing the next steps by the Burman Group and any potential legal challenges from Mr Gaekwad or other stakeholders.
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