The Burman Family acquired a big portion of controlling stake in Religare Enterprise limited (REL). This is not just a significant corporate development in the Indian financial sector, but also sets new and evolving trends in corporate governance conglomerate diversification and consolidation of the Indian market. This particular news had not only gained traction in the domestic ground but also tickled the international media about the financial changes going on in India, a major player with 1.4 billion population in the world economy.
Who are the Burman Family?
The Burmans are one of the biggest business families of India who are best known for the ownership of Dabur India Ltd. Dabur started as a small family business and now it is a multinational consumer goods company. The journey of the entrepreneurial family began back in 1884 when Doctor S. K. Burman, an Ayurvedic expert from West Bengal started “DABUR” to provide to the masses affordable and efficient natural remedies for the menace of cholera and malaria. Many people feel that the name Dabur came from an Indian surname, however, very interestingly, the name is actually derived from the Devnagari rendition of “Daktar Burman” (Doctor Burman in Bengali).
Over the last six generations, the Burmans have expanded their small medicine manufacturer company to a global brand offering ayurvedic products as well as personal care items and packaged foods. They have a big portfolio of products. Some of them are regularly used in our household like honey, Chyawanprash, Hajmola and even Real Fruit Juice!
In terms of their business operations, in the 1990 ‘s comma they had already interested their day-to-day operational work to professional experts while keeping a strong hold on the management themselves.
In the present day they have diversified their business into many sectors like financial services hospitality and healthcare and even made independent investments. The available data shows their net worth is over 9.6 billion dollars as of 2022 and it definitely makes them one of the wealthiest families of India based in the New Delhi region.
What is Religare Enterprises Limited (REL)?
Well, REL is a prominent diversified financial services holding company with their headquarters in New Delhi, India. The company was incorporated in 1984 and since then, REL has made sure they operate across significant verticals like loans to small and medium enterprises (SMEs), health and life insurances, housing finance and retail broking.
REL has a fast range of customers- it includes affluent individuals, retail establishments, SMEs and small to medium size corporates whom they serve to the subsidiary establishments of REL like Religare Finvest, Religare Health Insurance etc.
This company is listed on both Bombay Stock Exchange (BSE) as well as National Stock Exchange (NSE) and they hold the title of a core investment company registered with RBI. They not only have a strong domestic presence over the years they have expanded their financial network to regions like Mauritius, the UK, Singapore and even Hong Kong. The share of their market capitalization in 2024 reached approximately 9500 crores in Indian rupees. They have contributed to the revival of many Non-Banking Financial Companies (NBFCs) in India and they focused on diversified offerings to create sustainable and long-term value for all the stakeholders.
The Religare Acquisition: A New Financial Trend?
The great Religare acquisition did not happen overnight and it has been attracting so much limelight because the Burmans won over the stakes after an 18 month long takeover row. The Dabur Group has managed to secure a whopping 25.16% stake in the month of February this year. They have become Religare’s first promoter since 2018.
Let’s look into Industry Dynamics.
This part is going to be a bit more technical in nature. I’ll try to delve deep into the battle between the Dabur group and the Religare enterprises that unfolded slowly over the years. In this article, I have tried to provide an easy explanation of the acquisition terms and how it has affected the Indian market.
- The Beginning: although, formally the battle of takeover is 18 months it started around 2018. The Burmans initially acquired 11% share. The family kept on increasing their holding through open market purchases and through direct investments which also included a ₹570 crore ‘preference share issue’ in the month of June in 2021. By early 2023, the stake holding had a significant increase and it was exactly 21.54%. This sent a clear signal to the REL that the Dabur Group is not just interested in making the word software money through investments but also gaining control of the diversified financial services firm.
- Open Offer Trigger: by the time it was September 2023, the birdman family had successfully crossed the threshold of 25% ownership in the finServ company. It automatically triggered SEBI bound by their regulations norms to announce an Open offer. It was good news for the Dabur group and they expressed their wish to acquire an additional 26% stake in REL at ₹235 per share. It amounted to an offer of over ₹200 crore. The board of management in the REL, including former executive chairperson Rashmi Shaluja strongly registered the move. The management felt that this offer seriously undervalued their company and raised the question of the “fit and proper” of the investor party. Despite their attempt to increase the valuation, the Burmans persisted with a nominal 3.99% increase.
- The Final Takeover: after the Open offer in September, it was only a matter of time. The family consolidated control using the method of preferential shares. The family announced ₹2000 crore capital infusion and the goal was clearly to exceed the 50% stake bar. This move made the Burmans majority stakeholders of the company and now they are allowed to implement governance reforms and implement strategic realignments. It was not just a game of money and the regulatory clearances received from CB and RBI played a vital role in enabling the takeover. Nonetheless, the approval came with certain conditions- like the maintenance of corporate structures and consolidating non-banking financial companies (NBFCs) within certain specified timelines. The corporate governance can be tweaked into the favour of the Burman family, but they also must maintain the first enable nature of the company as it had been before the takeover.
This takeover clearly shows the vision Dabur group had for REL including that of remodeling of its subsidiaries and re-branding the group and in the long run transforming it into a competitive player in the ancient service sector of the Indian market. The takeover is not just getting the attention because of the hostility from the initial board members or even the aggressive approach of the Dabur group. It shows broader trends in corporate governance. It is an example of rising merger and acquisition activities in India and the increasing regulatory oversight from the government institutions.
Conclusion:
With the emergence of UPI and government schemes like PM Jan Dhan Yojana, the amount of financial inclusion in our country has reached over 70%. The huge financial market has a lot of potential to boom in the upcoming 5 years. Therefore, the move by the “Fast Moving Consumer Good (FMCG)” Company to acquire controlling shares of a financial service company demonstrates the emerging trends in the Indian market and the plausible pivotal shifts in corporate governance we might witness in the coming years.
