Sebi rejects Danny Gaekwad’s Religare bid, calls it ‘frivolous’

The Securities and Exchange Board of India (Sebi) on Friday dismissed an application from US-based investor Digvijay ‘Danny’ Gaekwad (Danny Gaekwad Developments & Investments), who sought permission to make a competing open offer for Religare Enterprises Ltd (REL).

Gaekwad had requested an exemption under the Substantial Acquisition of Shares and Takeovers (SAST) Regulations to propose an offer at ₹275 per share, aiming to acquire 55% of REL’s outstanding share capital. His bid sought to surpass the Burman Group’s existing open offer, which was priced at ₹235 per share.

Read this | Who is Danny Gaekwad—the US tycoon taking on the Burmans’ open offer for Religare?

On 12 February, the Supreme Court permitted Gaekwad to deposit ₹600 crore  in a Reserve Bank of India (RBI)-designated account by 2pm on 13 February to demonstrate his financial capability. However, he failed to meet the deadline, reinforcing Sebi’s concerns over his ability to fund the offer.

Further, despite proposing a higher price than the Burman Group, Gaekwad had not secured necessary regulatory approvals from Sebi or the RBI, further casting doubt on the legitimacy of his bid.

“In the absence of adequate proof of financial resources, the application does not appear to be bona fide. It seems frivolous and aimed solely at hindering the open offer process,” Sebi stated in its order.

Additionally, Sebi found that Gaekwad’s merchant banker, PL Capital Markets Pvt. Ltd, had conducted inadequate due diligence. During hearings, PL Capital representatives appeared unaware of Gaekwad’s financial credentials, raising further questions about the credibility of the application, according to the Sebi order.

Read this | Danny Gaekwad’s ₹5,000-crore open offer for Religare unlikely to pass muster with Sebi

None of the involved parties—Burman Group, Religare, Gaekwad, or PL Capital—responded to Mint‘s requests for comment.

Dispute over open offer timing

A central issue in Sebi’s rejection was the timing of Gaekwad’s proposed competing offer. He argued that the Burman Group’s open offer was publicly announced on 18 January, which he claimed was the relevant date under Regulation 20(1) of the SAST Regulations.

However, Sebi clarified that the actual announcement was made on 25 September 2023. Under regulations, any competing offer had to be launched within 15 working days of the Detailed Public Statement (DPS), which was issued on 4 October 2023. This deadline had long since passed.

Meanwhile, the Burman Group open offer closed on 13 February 2025, with the family acquiring an additional 0.26% stake, bringing its total holding in Religare to 25.44%.

Read this | What is driving the Burmans’ quest for Religare?

Sebi also emphasized that allowing Gaekwad’s competing open offer to proceed would disrupt market dynamics, particularly since the Burman open offer had already seen significant shareholder participation.

“A competing offer, which is not backed by financial capability, would disrupt market dynamics and erode investor confidence,” wrote Sebi whole-time member Ashwani Bhatia in the order.

Given the expired regulatory window, lack of financial credibility, and potential market disruption, Sebi concluded that approving Gaekwad’s offer was not in the best interest of REL shareholders.

“The right of a bona fide applicant to make an independent open offer is not curtailed in any manner. At this stage, it does not seem appropriate to allow a competing open offer by Gaekwad, only on the ground that the price offered by him is more than the price offered by the Burman Group,” the order stated.

What’s next?

Abhiraj Arora, a partner at Saraf & Partners and former Sebi officer, remarked that Sebi’s ruling marks the near-conclusion of this corporate saga. However, he suggested that the broader story—one involving governance lapses, regulatory oversight, and legal battles—could serve as a case study in corporate governance.

“Whether this story unfolds on Amazon or Netflix remains to be seen, but it must be told to highlight how governance frameworks, market mechanisms, and investor interests have been tested and, at times, circumvented,” Arora remarked.

When asked whether the ruling barred Gaekwad from future acquisition attempts, Arora said that he could still apply 20 days after the Burman Group’s offer closure. However, any future bid would require him to deposit the requisite funds in an escrow account beforehand.

Also read | Sebi notches up governance norms and easing procedures: What it means for investors

On whether the ruling set a precedent that could deter competing offers, Arora believed it provided much-needed clarity. “Sebi explicitly said that while such situations may not fall under the category to grant exemption, MBs (merchant bankers) must exercise thorough due diligence before accepting a mandate (for offers). Ensuring the financial credibility of the acquirer is essential before making an open offer,” he said.

Other experts noted that Sebi’s approach could clarify timeline calculations in cases requiring multi-agency approvals, streamlining future processes.

Other experts said that Sebi has set a precedent for calculating timelines in cases involving multi-agency approvals, potentially easing procedural constraints in similar scenarios. However, the regulator’s strict adherence to Regulation 20(1) could indicate a narrow approach that prioritizes compliance over shareholder value. 

“While strict enforcement is necessary, a rigid approach could sometimes limit shareholder value by discouraging competing offers. However, in this case, the rejection was justified due to the lack of financial proof and compliance”, said Ketan Mukhija, senior partner at Burgeon Law.