While slapping a penalty of Rs1 crore on Care Health Insurance Ltd (CHIL), the insurance regulatory and development authority of India (IRDAI) has asked the subsidiary of Religare Enterprises Ltd to buy back within 30 days 7.57mn (million) shares allotted to Dr Rashmi Saluja, the non-executive director and chairperson of Religare Enterprises Ltd (REL). CHIL needs to buy back the shares allotted under the employee stock ownership plan (ESOP) at Rs45.32 per share, the same price per share as the exercise price.
In
an order, IRDAI says, "To the extent of any stock options to Dr Rashmi Saluja, which remains unexercised and unvested as on the date of this order, CHIL is hereby directed to cancel and revoke such stock options. In any event, CHIL shall ensure that no further grant and or allotment shall be made to Dr Saluja."
The ESOP shares in question are valued at around Rs250 crore and have become a point of contention between the Religare board led by Dr Saluja and the Burman family which has invested around Rs900 crore to Rs1,000 crore in Religare.
In a letter on 10 May 2022, IRDAI directed CHIL to refrain from issuing stock options to Dr Saluja as per the 2016 remuneration guidelines issued by the regulator.
However, it found that CHIL granted 22.71mn ESOPs, of which 7.57mn ESOPs were exercised by Dr Saluja on 4 October 2023, even after the rejection of the request to approve the issuance of ESOPs by IRDAI.
As per the 2018 circular, IRDAI says the regulatory requirement of obtaining prior approval of the regulator for payment of remuneration to non-executive directors (NEDs) on their board is upon the insurer. "The approval required under the circular is independent of Dr Saluja's position as the chairperson and executive director of REL. CHIL is subject to the regulatory supervision of IRDAI and the 2018 circular imposes a clear and non-derogable duty in CHIL to ensure that a director, who is on their board and also an insurance intermediary, is not provided any remuneration without having obtained prior approval of the IRDAI."
During the hearing, CHIL contended that it had granted ESOPs to several employees of REL since the inception of the scheme. However, IRDAI rejected the contention saying, "...CHIL has failed to establish or provide any details in relation to whether any of the employees of REL were NEDs of CHIL, while also being on the board of an insurance intermediary, at the time of the grant of such ESOPs."
Further, the insurance regulator says, "The requirement to procure prior approval of IRDAI for providing remuneration to NEDs of insurers, who are common directors in insurance intermediaries (other than in relation to sitting fees), cannot be avoided on the grounds of such common director receiving stock options of the insurer in his/her capacity of a director or employee of any other company."
"The payment of remuneration (other than sitting fees) to Dr Rashmi Saluja, who is a NED and chairperson of CHIL, and also a common director with an insurance intermediary, in any event, required the prior approval of the IRDAI. It is reiterated that the fact that Dr Saluja held the position of the executive chairperson of REL does not dilute the requirement of complying with the directions of the IRDAI and the provisions of the regulations, guidelines and circulars issued by the IRDAI," it says.
Earlier this year, the Burman family, the promoters of Dabur India and other entities, which collectively own 21.24% of Religare Finvest Limited (RFL) through its entities, raised concerns about the alleged allotment of 8% of RFL shares to Dr Saluja. They had announced an open offer in September 2023 to acquire up to 26% stake in REL for Rs2,116 crore. They expressed disappointment that a single executive had received a significant amount of remuneration through ESOPs at REL, CHIL and RFL without proper approval and disclosure to REL shareholders. (
Read: Burman Family Raises Concerns over Allotment of 8% Stake in Religare Finvest to Rashmi Saluja through ESOPs)
