Thumbs down from investors, no relief by court: Can Saluja hang on to Religare?

Mumbai: Religare Enterprises chairperson Rashmi Saluja’s attempt to hold on to her board position in an acrimonious takeover battle has taken a fresh turn.

On Tuesday, around a third of the financial services company’s investors confirmed to Mint about voting against Saluja’s reappointment as director in the lead-up to the company’s annual general meeting (AGM) on Friday, 7 February. This drastically reduces her chances of continuing at the helm of the company she helped revive from the brink of bankruptcy.

Voting began on Tuesday morning for three resolutions, one of which pertains to the reappointment of Saluja as a director on the company’s board.

The same day, the Delhi High Court declined any relief to Saluja, paving the way for the shareholder meeting to continue. Last week, Saluja had sued the company she heads and prayed for a stay on the AGM.

“Today, after hearing detailed submissions from her lawyer, the Delhi High Court did not grant her (Rashmi Saluja) an interim relief seeking an injunction on the AGM proceedings scheduled to be held on 7th February,” said senior Supreme Court lawyer Nalin Kohli. Kohli represents four of the five independent directors: Praveen Tripathi, Malay Sinha, Ranjan Dwivedi, and Preeti Madan.

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“While anyone who approaches the court for urgent relief is entitled to invoke all their legal rights and arguments, in this case, and particularly in light of the documents she annexed with her suit, expecting a stay on the AGM can be seen as a desire of gigantic proportions,” said Kohli.

“In light of today’s outcome, there is no impediment on shareholders exercising their corporate democratic right to appoint and remove a director,” he added.

In a separate case, the Delhi High Court denied immediate relief to minority shareholder Sapna Govind Rao, who had appealed against an earlier single judge order rejecting a stay on the Burman family’s open offer to consider a competing offer.

The court directed Sebi to decide on US resident Digvijay ‘Danny’ Gaekwad’s proposed competing offer in accordance with the law. Gaekwad has offered to pay ₹275 per share to acquire up to 55% stake in Religare through an open offer compared to the ₹235 per share offered by the Burman family.

Saluja’s chances bleak

Investors who own 31.85% of the company, including the Burman family, have confirmed to Mint that they have voted against the proposal to reappoint Saluja.

The billionaire Burman family, which owns 25.1% of Religare, can only vote on 21.1% of the shares that they acquired before publicly proposing an open offer to acquire Religare. They cannot cast votes for the remaining 4% of shares they acquired afterwards. This effectively reduces the maximum number of votes that can be cast on the resolution to 96% of the company’s outstanding shares.

Also read | Takeover twist: Now, Rashmi Saluja sues Religare Enterprises

While the voting pattern of two-thirds of shareholders is yet not known, Saluja would need a miraculous turnout from the company’s smaller investors—including retail shareholders who hold 10.21% stake in the company—in her favour, if she is to stage a comeback.

Saluja’s reappointment, which needs to be stamped by at least half of the shareholders, looks bleak. If all 96% of the eligible votes are cast, she needs over 48% of shareholders to vote in her favour. However, in the previous two AGMs of the company in September of 2022 and 2023, only 54-59% of shareholders exercised their vote, including on resolutions seeking the reappointment of Saluja.

Religare has no promoter and all its shareholders are classified as public investors.

Who voted against Saluja

In addition to the Burman family, investors, including financial services firms, mutual funds, and family offices, which together own 10.75% of Religare, have opposed Saluja’s continuation at the company.

“We believe now there is a need for change in the management. There has been too much distraction over the last one-two years and the company needs a new vision going forward and needs to be put on the growth path,” said Jimeet Modi, founder of Samco Group, a financial services firm.

Also read | Two Religare directors criticise haste in revealing Gaekwad bid; Saluja moves high court

Modi’s family holds 9.4% stake in Religare through eight entities, the largest of which are Chandrakanta and Quick Trading and Investment Advisors, which have 4.75% and 3.39% stakes, respectively.

“This is essentially a vote for change,” Modi said.

Separately, according to stock exchange data, Samco Active Momentum Fund holds a 1.35% stake in the company as of 31 December. Umeshkumar Mehta, chief investment officer of Samco Mutual Fund, said the institution will vote against Saluja’s re-appointment following the recommendation of proxy advisory firms.

Three proxy advisory firms, including Institutional Investor Advisory Services India Ltd (IiAS), InGovern Research, and Stakeholders Empowerment Services (SES), have recommended that shareholders reject Saluja’s reappointment as a director.

End of the road?

The investor backlash against Saluja could lead to an ignominious end to her six-year stint at Religare. After Religare’s founders, Malvinder Mohan Singh and Shivinder Mohan Singh, were arrested for siphoning money from one of its subsidiaries, Saluja, since joining the board in December 2018, scripted quite a turnaround.

Two of Religare’s earlier investors, American investment bank SSG Capital and hedge fund Bay Capital Partners, got Saluja to the company, as reported in a Mint article dated 7 December 2023.

And read | Religare takeover saga takes a fresh twist with the entry of a mystery Bangkok investor

However, what marked Saluja’s downfall was her opposition to the Burman family’s takeover attempts. In September 2023, the Burmans offered to buy 26% shares from public investors at ₹235 a share. This marked the start of a nearly 18-month battle that saw charges and counter-charges of impropriety traded between Saluja and the Burmans.

Varun Sood in Bengaluru contributed to this story.