Miffed Irdai questions Care top brass on Saluja Esops

Rashmi Saluja, non-executive chairperson, Care Health Insurance.
Rashmi Saluja, non-executive chairperson, Care Health Insurance.


  • Religare unit asked to reply in a week on “excessive” grant

MUMBAI : The insurance regulator has asked top executives of Care Health Insurance Ltd to explain the issue of stock options to non-executive chairperson Rashmi Saluja despite being told not to do so, two people aware of the matter said.

On 22 November, officials of the Insurance Regulatory and Development Authority of India (Irdai) summoned Anuj Gulati and Anoop Singh of Care Health and questioned them about “excessive" stock options issued to Saluja and Gulati, the people said on the condition of anonymity. While Gulati is managing director and chief executive of Care Health, Singh is chief compliance officer.


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“Irdai is very concerned about 22.7 million employee stock options (Esops) approved by the Dr. Saluja-led board of Care Health to Dr. Saluja herself. This is worth hundreds of crores of money for one person who is not a promoter, just an employee," one of the two people said.

The issue of stock options came into focus after the Burman family (of Dabur) made an open offer for Religare Enterprises Ltd, the parent of Care Health. After the Religare board opposed the proposal, the Burmans alleged that Saluja, who is also non-executive chairperson of Religare, had received hefty stock options from Care.

The open offer by the Burman family for Religare, where it already owns a 21.54% stake, was announced on 25 September. The offer for the additional 26% at 235 per share will cost 2,116 crore. The total 51% stake that the Burmans aim to own is worth about 3,400 crore. After a brief initial welcome, the Religare board claimed the offer price was low and accused the Burmans of having links with Radha Soami Satsang Beas (RSSB) and Religare founders Shivinder and Malvinder Singh, who are facing fraud charges.

The Burmans rejected these allegations and said the Religare board failed to comply with corporate governance norms; Saluja traded in shares of Religare while being in possession of privileged insider information; and her average annual compensation is as high as 150 crore, including Esops from Religare and Care Health Insurance.

However, in a statement defending Saluja, Religare rejected charges of insider trading. The statement stated that the Care Health Esops vest over a period of time subject to conditions, and said even after adding the value of performance-linked Esops, Saluja’s FY23 remuneration stood at 42.06 crore, against 150 crore as alleged by the Burmans.

Meanwhile, proxy advisory firm InGovern said the Care stock options were not explicitly declared to Religare shareholders and no approval was sought for granting them.

“The Care Health board, Gulati and Singh have been asked to reply or clarify within a week on certain questions by Irdai related to the excessive Esops issuance in Care Health to both Dr. Saluja and Gulati," said the second of the two persons mentioned earlier.

The premium income of Care Health has jumped fivefold since Saluja took the helm of parent Religare in 2018, making it the second-largest standalone health insurer in the country.

The biggest subsidiary of Religare, Care Health is estimated to be worth at least 10,000 crore based on its embedded value. Religare’s market value is lower than Care’s estimated value, but its stock reflects the business performance of Care.

The Religare stock stood at 175.62 at the beginning of the year. On 21 and 22 September, the two days when Saluja sold some of her shares, it touched the highest levels at 279 and 280.3, respectively. It fell to 258.14 on the day of the Burman open offer on 25 September, and it has fallen further to close at 218.15 on Friday. The board led by Saluja has stated that any offer price below 275 is not fair; however, market research reports have predicted that Religare’s shares may gain after the Burmans’ takeover.

Incentivizing someone by ignoring a regulatory directive raises a “serious issue" on governance, a corporate lawyer at a leading law firm said. “As a material subsidiary of a listed company (Religare), at least one of the independent directors of Care Health is also on the board of Religare, and it is the duty of such independent directors to flag off the issue to the board or the regulator immediately, asking how were the shares granted to a particular individual despite Irdai’s rejection. In this case, after Irdai rejected the Esop proposal for Saluja, instead of granting her the shares directly, the board did it indirectly by terming her a Religare employee. He suggested Irdai should initiate a thorough probe and take appropriate action, and rope in Securities and Exchange Board of India as well since it involves Religare, a listed holding company.

The three independent directors serving on the boards of both Religare and Care are Malay Kumar Sinha, Hamid Ahmed and Praveen Kumar Tripathi.

According to a 15 November note by InGovern, in the past 3-4 years, the total valuation of Religare and Care Health options issued to Saluja is more than 480 crore.

Emails sent to Irdai, Religare, Saluja, Gulati and Singh remained unanswered.

Neither Religare nor Care Health revealed in their FY23 annual reports that Saluja got 22.7 million Esops of Care Health.

Religare’s annual report only stated that 27.7 million Esops of Care Health were issued to Religare employees on 17 January, 2022 under the insurer’s Series VIII New Esop scheme; of this, 22.7 million options were re-granted on 13 June, 2022, which is a month after Irdai rejected the Care proposal.

On 28 December 2021, the Care Health board approved issuing Esops to Saluja. On 10 May 2022, Irdai rejected the proposal, stating non-executive directors of insurers are allowed payment of “only profit-related commission to the tune of 10 lakh per annum" and secondly, her roles and responsibilities as a non-executive chairperson are “largely similar to those of a non-executive director"; therefore, the remuneration payable to her should be commensurate with that of other non-executive directors.

However, Care Health did not wait for the Irdai approval; instead, it issued the Esops in January 2022 itself. Despite the Irdai rejection that came later, these options were not clawed back, on the grounds that the Esops were given to Saluja in her capacity as Religare’s chairperson and not as non-executive chairperson of Care Health.

The regulator is not pleased about the way the Care Health board, also headed by Saluja, incentivized her by granting stock options worth over 250 crore despite it rejecting the plan. To be sure, it is not clear if Saluja attended the board meetings that approved the grant of stock options.

Irdai officials discussed this matter at length with the two Care Health executives at the meeting, the two persons said.

“Irdai has demanded a detailed explanation from Care Health board for going against its intention in the directive over Esops. Also, every rule has to be followed both in letter and spirit. After Irdai’s rejection, Care Health decided to incentivize Saluja in the same manner but through a different route. This is concerning," said the second person.

The regulator also wants to know why the Religare annual report did not mention the Care Health Esops as part of Saluja’s compensation. “This is in disregard to a basic corporate governance practice," said the second person.

The Care Health options granted to Saluja is about 2.5% of the entire share capital of the insurer, which is significant and “material", especially because the entire holding concerns a single person and not a group of employees or individuals, a corporate lawyer said on the condition of anonymity.

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