A 140-year-old storied business family has found itself on the wrong side of the law in the middle of a conflict with the board of a financial services company the family wants to take over.
The Burmans, who control FMCG major Dabur, are one of the oldest business families in India, their business dating back to 1884 when Dr SK Burman in Kolkata started making natural medicines for curing diseases like cholera, malaria and plague. He formed a company called Dabur, from initials of his popular address ‘Daktar Burman’. The motive behind the venture was to provide effective medicines to people in remote villages at an affordable cost. Today, the Ayurvedic products and FMCG company has a market cap of more than $11 billion and boasts of some of India’s best known consumer brands such as Dabur Chyawanprash and Vatika hair oil.
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As the Dabur family, now being spearheaded by the fifth generation, spreads its bets beyond its traditional FMCG and Ayurvedic business, it has run into trouble with the law. Recently, an FIR by Mumbai police into the Mahadev betting app has named Dabur chairman Mohit Burman and director Gaurav Burman. However, both have denied any links to the illegal betting case.
What led to the FIR
The Burman family had through various entities accumulated a 21.5% stake in Religare Enterprises Ltd. (REL) by August this year. In September, it bought another 5.27% stake, triggering a mandatory open offer to buy an extra 26% stake from the public. In the same month, the family announced plans to raise its stake in REL by investing $255 million in an open offer for a 26% stake, thus intending to take control of the company.
But nearly a month later, the independent directors of REL wrote to regulators such as RBI, Sebi and the insurance watchdog, levelling allegations of fraud and other breaches against the Burmans. The independent directors sought to make the issue a broad-based one, highlighting REL’s ownership of companies operating in regulated businesses and arguing that the party seeking to acquire the business ought to be scrutinised for the “fit and proper” criteria that apply to licence holders in these segments.
REL owns four key businesses. Religare Finvest is a lender to small businesses, Care Health Insurance is a health insurance provider, Religare Housing Development Finance Corp offers home loans and Religare Broking is a retail stock brokerage.
REL was founded and controlled till 2018 by the Singh brothers of Ranbaxy and Fortis – Malvinder and Shivinder – who had to serve jail time for fraud involving siphoning off funds from their companies. They lost control of REL due to the invocation of pledges by lenders. A board comprising independent directors was put in place to steer the company to safety and recover siphoned-off funds. The board, led by executive chairperson Rashmi Saluja, has been successful and the market has responded favourably..
REL’s independent directors have alleged that the Burmans are in material breach of regulatory obligations that may harm the firm.
The allegations in the letter, a copy of which has been reviewed by ET, include charges of collusion with the erstwhile owners, the Singh brothers; a pending case of fraud against Dabur India chairman Mohit Burman; questions about the source of funds to be used for the acquisition; and market manipulation, among others. According to the letter, the Burman Group is involved in various “frauds and financial improprieties,” which are being investigated by various statutory authorities.
The Burman family has claimed that the allegations by the REL directors are a response to the Burmans drawing attention to some trades by an unspecified executive. “At this stage, we are concerned that some of these statements are being orchestrated as falsehoods by interested persons at REL… Some of these allegations are being made because we drew the attention of the company by our letter dated October 26, 2023, to the board of REL, to certain share trades by a certain senior executive at REL immediately prior to the launch of our open offer,” according to the Burman family statement. “We are concerned that instead of dealing with the legitimate queries raised in our letter of October 26, 2023, the attention of regulatory authorities/board/public shareholders is being deflected to such falsehoods.”
In an email sent to Sebi and bourses on November 8 that has been reviewed by ET, four entities of the Dabur family that collectively hold 21.24% in REL said REL chairperson Rashmi Saluja sold a portion of her personal holdings in the firm soon after a meeting with a representative of the Burmans.
The representative had informed her of the Burmans’ intention to make an open offer to acquire control of the company. A Religare spokesperson said the meeting with Burmans’ representative had nothing to do with sale of shares by Saluja.
Days later, Dabur chairman Mohit Burman and director Gaurav Burman were named in an FIR in the Mahadev app betting case. The Burman family said the FIR was an “arm-twisting” attempt that comes at a time when the Burman family is in the process of acquiring Religare Enterprises.
The Enforcement Directorate is probing Mahadev Book betting app and its promoters for money laundering. The central agency has pegged the size of the scam at ?5,000 crore. Earlier this month, in a press statement, the agency said it was probing whether the Chhattisgarh Chief Minister Bhupesh Baghel received ?508 crore from the absconding promoters of illegal betting app.
The Burman family’s diverse forays
Burman Family Holdings, which has a controlling stake in Dabur, was established in 1995, shortly after Dabur went public. Its investments and partnerships range from domestic startups like DMI Finance to global companies such as Yum! Brands Inc.’s Taco Bell and Aviva Plc.
Besides owning Taco Bell in India, the Burmans have a food retailing venture, Lite Bite Foods, which operates restaurant brands such as Punjab Grill and Zambar. The family has a joint venture with a very large Japanese health-care business, M3. It has also invested in coffee business in the US. The family has invested in IPL team Punjab Kings as well as in kho-kho and poker. The family also owns many other businesses which include HealthCare atHOME (HCAH) and Burman Hospitality.
Last year, the Burman family became the promoter of Eveready Industries, the Kolkata-based flashlight and battery maker, by owning 38.38 per cent in the company after the completion of an open offer in June 2022. In a short span of less than six months, the family office of the Burmans managed to turnaround Eveready Industries. While the Burmans right now focus on its existing products, they might add more to turn Eveready into a consumer durable company.
Though the Burman family has long been into financial services, the plan to raise the stake in Religare Enterprises Ltd in order to wrest control of it comes at a time when the financial services sector is getting innovative as it increasingly goes online. It is also set to see more competition with the entry of Jio Financial Services of Reliance Industries.
These diverse bets of the Burman family are a long way off from its traditional Ayurvedic business which expanded to personal care.
The Burman family is scouting for acquisitions at home and in Southeast Asia as it works to establish its presence in a new overseas market amid heated domestic competition, ET had reported early this year. Last year, it had bought spice producer Badshah Masala for $71 million.
The expansion plans come as Dabur faces intensifying competition from deep-pocketed rivals — including global consumer titan Unilever Plc — which are swooping in on upstart Indian brands. Powerful Indian conglomerates led by two of Asia’s richest men, Mukesh Ambani and Gautam Adani, also have ambitious plans to scale up in the household retail space, while Tata Consumer Products Ltd. is looking to bulk up its portfolio through acquisitions.