Irdai cancels Rashmi Saluja’s Care Health Esops

  • In a late evening order on Tuesday, the Insurance regulator also directed the company to take prior approval before fixing the remuneration of any director in future until further orders

Anirudh Laskar
Published24 Jul 2024, 09:43 AM IST
 Religare Enterprises chairperson Rashmi Saluja.
Religare Enterprises chairperson Rashmi Saluja.

Mumbai: India's insurance regulator has directed Care Health Insurance Limited to cancel the hefty stock options that it granted to Religare Enterprises Ltd chairperson Rashmi Saluja. This could be a setback to Saluja and Religare’s board in their struggle against the Burman family for control of the financial services company.

In a late evening order on Tuesday, the Insurance Regulatory and Development Authority of India (Irdai) directed the private insurer to cancel Saluja's stock options and also to take Irdai's prior approval before fixing the remuneration of any director in future until further orders.

Saluja and the board of Religare have been vehemently opposing a takeover of Religare by the Burman family, which owns more than 25% in the company.

Care Health is the main cash-generating subsidiary of Religare and the country's second-largest standalone health insurer. The company is worth at least 10,000 crore, based on the price of its shares at 110 apiece in its last rights issue in 2022. It underwrote a premium of 6,864.5 crore in fiscal year 2023-24, recording a 33-51% year-on-year growth.

Emails sent to Religare and Care Health did not elicit any response till press time.

The Irdai move: How it happened

In December 2021, Care Health had sought IRDAI's permission to grant 22.7 million ESOPs to Saluja. In May 2022, IRDAI rejected the proposal, but the company issued the ESOPs to Saluja in June 2022 after taking legal opinion from former IRDAI chairman J. Hari Narayan and advocate Arvind P. Datar.

On 14 June 2024, IRDAI served a show cause notice to Care Health, asking the latter why penal action should not be initiated against the insurer for issuing stock options to Saluja despite IRDAI's disapproval. This followed a letter from the Burmans in May this year that warned of legal action against the board of Care Health if it does not prevent Saluja from cashing out her ESOPs.

Also read | SAT grants Religare time till 22 July to comply with Sebi order in Burman Family’s open offer matter

On 15 July, IRDAI held a personal hearing of the top management of Care Health on the matter involving Saluja's stock options.

On Tuesday, following the hearing, IRDAI said Care Health has violated Section 48A of the Insurance Act and ignored IRDAI's restrictions imposed on insurers in terms of granting permission for appointing a common director.

IRDAI said Care Health has also breached the applicable laws in terms of the “IRDAI (Remuneration of Non-Executive Directors of Private Sector Insurers) Guidelines, 2016, for payment to non-executive director in form other than ‘profit related commission’ and ‘sitting fees’.”

Of her 22.7 million ESOPs, Saluja has already exercised 7.57 million.

IRDAI's order details

IRDAI has ordered Care Health to buy back these shares from Saluja at the same price per share as the exercise price (that is, 45.32 per share) within 30 days.

The insurance watchdog also ordered Care Health to cancel and revoke all the remaining (unexercised) stock options granted to Saluja within 15 days, and directed the company not to allot any further stock options to Saluja.

IRDAI in its latest diktat said that in order to "secure the proper management of Care Health", the insurer will now need to take IRDAI's prior approval for taking any decision “in relation to remuneration/ payment/ perquisite or other benefit, monetary or otherwise in relation to any member of the board including MD & CEO of CHIL”. Currently, Anuj Gulati is the the MD & CEO of Care Health.

Additionally, IRDAI has imposed a penalty of 1 crore on Care Health.

Care Health's arguments

Last week, Mint reported that while defending Saluja's stock options, in a 21 June letter in response to IRDAI's show cause notice, Care Health has questioned IRDAI's jurisdiction over stock option issuances.

Care Health had argued that since Saluja was granted the stock options of Care Health in her capacity as an employee of Religare and not as the non-executive chairperson of Care Health, neither IRDAI's approval not any intimation of such an allotment is required.

Read more | Mint Explainer: Why did Sebi issue notice to Rashmi Saluja, Religare board?

On Tuesday, while passing the order, IRDA refuted this argument and said the requirement to secure the regulator's prior approval for providing remuneration to non-executive directors of insurers such as Saluja (who are common directors in insurance intermediaries), cannot be avoided.

IRDAI said the fact that Saluja held the position of the executive chairperson of Religare does not dilute the requirement of complying with the directions of the IRDAI.

"Care Health is subject to the regulatory supervision of the IRDAI and the 2018 Circular imposes a clear and non-derogable duty on CHIL to ensure that a director, who is on their board and also an insurance intermediary, is not provided any remuneration without having obtained the prior approval of the IRDAI (other than sitting fees)," said IRDAI'S latest order.

Accordingly, for issuance of stock options, IRDAI said, the company is required to comply not only with the provisions of the Companies Act, but also the additional obligations imposed by the IRDAI through directions (such as under the IRDAI Letters) as well as those specified in the the 2016 remuneration guidelines and the 2018 circular.

"In relation to the averment of Care Health that several employees of Religare were granted ESOP of Care Health, ever since the inception of the ESOP Scheme of Care Health, the authority finds no merit, given that Care Health has failed to establish or provide any details in relation to whether any of the said employees of Religare were non-executive directors of Care Health, while also being on the board of an insurance intermediary, at the time of the grant of such ESOPs," added IRDAI.

The background

The Burman family, which is awaiting a regulatory nod to take over Religare for a total consideration of about 3,400 crore, has been alleging a failure of corporate governance at Religare and its subsidiaries, primarily on the grounds of excessive remuneration doled out by the boards of Religare and Care Health, both of which are chaired by Saluja.

The Burman family has been alleging that Saluja's total remuneration is worth over 450 crore, including the ESOPs valued at 250 crore granted by Care Health in June 2022, which was done despite IRDAI's disapproval.

Saluja and the board of Religare have been defending her remuneration while arguing against the suitability of the Burman family as the incoming promoter of Religare.

Ever since the Burman family announced its plan on 25 September 2023 to take over Religare, the company's board led by Saluja has been protesting against the Burmans' offer , terming their open offer price to be too low at 235 apiece and questioning their credibility.

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First Published:24 Jul 2024, 09:43 AM IST
Business NewsCompaniesIrdai cancels Rashmi Saluja’s Care Health Esops

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