The controversy over Care Health Insurance Ltd’s award of hefty stock options to its chairperson Rashmi Saluja has taken a turn that may delay the billionaire Burman family’s bid to take over the company’s parent entity, Religare Enterprises Ltd.
In a move that may spark a fresh legal tussle, Care Health has argued against the insurance regulator’s powers over stock options granted to anyone in an Indian insurance company.
Recently, Care Health wrote to the Insurance Regulatory and Development Authority of India that no action should be taken against the company for awarding equity stock options (Esops) to Saluja despite the regulator rejecting its proposal.
Irdai’s approval was not “not required” for granting the Esops, Care Health said in its letter. The letter was in response to a 14 June show-cause notice by Irdai asking why Care Health should not be penalised for granting Esops to Saluja despite the regulator’s rejection.
Saluja’s stock options from Care Health, issued in 2022, are worth at least Rs. 250 crore, as per the last valuation of the company’s shares.
The Burman family, which owns over 25% in Religare, has alleged in a complaint to Indian financial regulators that Saluja was drawing an excessive remuneration worth over Rs. 450 crore by granting herself bulky stock options from Care Health and Religare, both of which are chaired by her.
In its reply to Irdai’s notice, Care Health revealed for the first time that it had cancelled all prior stock options of Saluja after receiving the regulator’s letter of rejection.
Care Health said it had subsequently issued fresh stock options to Saluja after obtaining advice from former Irdai chairman J. Hari Narayan and senior advocate Arvind P. Datar. Only then did it issue fresh stock options, which cannot be construed as contravening any regulation or letter of Irdai, Care Health argued.
The insurer said confusion regarding Saluja’s stock options was created because the regulator was allegedly under the impression that the same Esops for which Care had sought Irdai’s permission in December 2021 were issued to Saluja despite the rejection.
Care apologised to Irdai for creating the “confusion” and asked the regulator to consider the fresh grant of Esops to Saluja on its “own individual merits”.
Queries sent to Care Health, Saluja, Religare, Irdai and the Burman family remained unanswered. Care Health had in December 2021 sought Irdai’s approval to grant 27.7 million stock options to Saluja. The regulator rejected the proposal in May 2022, arguing that a non-executive director was not qualified to earn a remuneration of more than Rs. 10 lakh.
Care Health later approved 22.7 million stock options to Saluja at Rs. 45.32 per share. That same year, it launched a rights issue of shares at Rs. 110 per share, basis which Saluja’s shares via stock options are valued at about Rs. 250 crore now.
Care Health argued in its reply to Irdai’s show cause notice that since the stock options were issued to Saluja as an employee of Religare Enterprises, and not in her capacity as the non-executive chairperson of Care Health, Irdai’s approval was not required.
Care Health is worth at least Rs. 10,000 crore, based on the price of its shares at Rs. 110 apiece in its last rights issue in 2022. The company, India’s second-largest standalone health insurance firm, underwrote a premium of Rs. 6,864.5 crore in fiscal year 2023-24, recording a 33.51% year-on-year growth.
Religare trading on NSE at Rs. 251.50 per share.
Care Health revealed in its latest letter to Irdai that Narayan had in his legal opinion on 23 May, 2022 said neither India’s company law nor its guidelines on remuneration to non-executive directors made any distinction between a chairman and a non-executive chairman.
“Accordingly, Narayan was of the view that no approval or permission of Irdai is required for the grant of Esops to Dr. Saluja,” Care Health said in its letter.
Care Health added that senior advocate Datar had also opined that since the company had issued Esops to Saluja in her capacity as the executive director and chairperson of Religare, and not in her capacity as non-executive chairperson of Care Health, it was not required to seek Irdai’s approval.
Both Narayan and Datar declined to comment for this report. (Source: Mint)
