InGovern raises red flags over Care Health Esops to REL's Rashmi Saluja

Proxy advisory firm InGovern Research Services has called for an investigation by the Insurance Regulatory and Development Authority of India (Irdai) and the Securities and Exchange Board of India (Sebi) into the remuneration and conflicts of interest of the executive chairperson of Religare Enterprises (REL), Rashmi Saluja, regarding her receipt of employee stock options (Esops) in the company’s subsidiary, Care Health Insurance.

In a statement, InGovern claimed that Care Health, a subsidiary of REL, issued Esops to Saluja despite Irdai rejecting the application.

The proxy advisory firm further asserted that REL did not seek shareholder approval for the Care Health Esops granted to Saluja, and there was no disclosure of these Esops in REL’s annual report.

However, a source close to REL stated that the Esops for Care Health were approved by the Care Health board following recommendations from the nomination and remuneration committee (NRC). The source emphasised that all norms and procedures were followed when granting Esops to Saluja.

“The remuneration of Saluja includes the perquisite value of Esops exercised only and not of unexercised Esops as the gain (if any) accrues only at the time of exercise of ESOPs,” informed the source.

Esops were granted to Saluja only in her capacity as employee/executive director and chairperson of REL. The Esops were not to be granted to her in her capacity as non-executive chairperson of Care Health, said a source close to the development.

The Irdai (Remuneration of Non-Executive Directors of Private Sector Insurers) Guidelines, 2016, does not require any permission from the authority for the grant of the specified Esops to Saluja since the remuneration to the chairman of the board can be decided by the board of directors, the source said.

The source said Care Health could, therefore, pass a fresh resolution for the grant of Esops to Saluja without requiring any Irdai approval.

Accordingly, after due consideration by NRC, a resolution was passed unanimously by the board of Care Health which includes Kedaara Capital that has substantial investment to the tune of ~567.3 crore in Care Health.

InGovern provided details, stating that as part of Saluja’s compensation, 10.5 million REL options were granted to her after her appointment in February 2020 as executive chairperson, valued at around ~230 crore today.

Another tranche of Esops was issued by Care Health, the unlisted subsidiary of REL, in January 2020, valued at ~250 crore.

InGovern did not specify its valuation methodology for unlisted Care Health.

Saluja serves as the non-executive chairperson of Care Health, the second-largest health insurance firm in India.

Kedaara Capital, a private equity firm, owns a 17 per cent stake in Care Health, while Union Bank of India owns another 15 per cent stake. REL, the holding company, holds the remaining stake.

REL is currently embroiled in a takeover battle between the Burman family of Dabur Group and the management led by Saluja. The latter has resisted the open offer made by the Burmans at ~235 per share, citing undervaluation of the company.

Dabur India, the listed entity of the Burman family, is not involved in the open offer.

The allegations against Saluja come shortly after Mumbai Police filed a first information report against Mohit Burman and Gaurav Burman for alleged links with a cricket betting syndicate and the Mahadev betting application. The Burmans have denied the allegations, stating that “vested interests” are behind these claims, aiming to thwart their family office’s open offer for REL.

Following the open offer, independent directors of REL made fraud allegations against the Burmans to regulators, including Sebi, Irdai, and the Reserve Bank of India, asserting that the Burmans do not meet the fit-and-proper criteria. The Burmans have refuted these allegations.

REL was established by siblings Malvinder and Shivinder Singh of Ranbaxy and Fortis. They were sent to jail for fund diversion from their companies. The Burman family is currently the single-largest shareholder of the company with a 21 per cent stake, which has launched an open offer pending clearance from regulators.