Religare Enterprises Ltd (REL), currently at the centre of a corporate control tussle, asserted on Friday that IRDAI’s recent no-objection letter to the Burman family’s open offer for REL shares should not be interpreted as regulatory approval for the proposed acquisition of the diversified financial services group.
This clarification aims to dispel interpretations in some circles that IRDAI’s position effectively signals the Burman family’s advancement towards gaining control of REL.
While conveying “no objection” to the proposed open offer, IRDAI stipulated that same is subject to all necessary approvals from other statutory/regulatory/judicial bodies as may be required, an REL spokesperson said.
Therefore, the letter from IRDAI is a “mere no objection” and not an approval “without any terms and conditions”, according to the spokesperson.
Furthermore, the no objection from IRDAI cannot be considered “approval being valid perpetually unless otherwise notified by the regulator” by any stretch of imagination, the REL spokesperson told businessline.
The outcome of the takeover battle and the proposed open offer still remains uncertain, with the final decision resting in the hands of regulators SEBI and RBI.
Both SEBI and RBI must address complex legal issues and navigate the series of allegations and counterclaims between the Burman family, the acquirers, and the Rashmi Saluja-led REL Board opposing the takeover.
IRDAI’s prior approval
REL had sought IRDAI’s prior approval for the Burman family’s open offer as Care Health Insurance Ltd (CHIL), a subsidiary of REL, was under the regulatory oversight of IRDAI. REL owns 63 per cent stake in CHIL and its ownership will remain unchanged even if Burman Family’s open offer were to go through eventually.
“Insofar as CHIL application, IRDAI has advised that “the open offer …does not involve any transfer of shares of CHIL. Accordingly, the provisions regarding register of transfer of shares of insurer under Section 6A(4)(b) of the Insurance Act, 1938 are not attracted. In this case, as such, the submission of the application for transfer of shares is not required. However, we have taken note of your submission and have no objection for the proposed open offer pertaining to the shares of REL subject to the insurer, promoter(s), transferor and transferees obtaining all the necessary approvals from other statutory/regulatory/judicial bodies as may be required,” REL spokesperson said quoting the IRDAI letter.
REL had sought IRDAI prior approval for the Burman family’s open offer for REL in respect of two downstream entities — CHIL and the MIC Insurance Web Aggregators Pvt Ltd.
Why REL sought IRDAI approval
“Based on our understanding of the provisions of Section 6A of Insurance Act, especially in the light of explanation to Section 6A about reckoning of holding of shares indirectly by shareholders of public company, regulatory application for prior approval for transfer of shares in terms of Section 6A of the Insurance Act was made in case of CHIL.
Similarly, as there was a change of beneficial ownership and control resulting from the open offer in terms of IRDAI (Insurance Web aggregators) Regulations, an application was made in case of MIC Insurance Web Aggregators Pvt Ltd”, REL spokesperson said.
While IRDAI has conveyed its no-objection in the case of CHIL, a decision of insurance regulator is awaited as regards to the application by MIC, the REL spokesperson added.