Religare Didn't Disclose Rs 250-Crore ESOPs Issued To Rashmi Saluja In Subsidiary, Says InGovern

Religare Enterprises Ltd. failed to disclose employee stock options issued to Chairperson Rashmi Saluja in its subsidiary Care Health Insurance Ltd., according to a report by InGovern.

The 2.27-crore options, representing 2.5% of the share capital and valued at over Rs 250 crore, were granted to Saluja in January 2022, the report said. The options were issued at a "deep discount" of an exercise price of Rs 45.32 per share, it said.

"It is worth noting that the company has mentioned Rs 45.62 per share as the estimated fair value of the shares of Care while in the same year, rights issue of Care shares was at a price of Rs 110 per share," InGovern said.

"The remuneration includes 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," Pratap Venugopal, independent director at Care Health Insurance, told BQ Prime.

However, the report further alleged that these ESOPs are also in contravention of the insurance regulator's laws, which "contemplate" issuance of stock options only to chief executive officers, whole-time directors and managing directors, the report said.

ESOPs were granted to Saluja "only in her capacity as employee/Executive Director and Chairperson of REL," Venugopal said. The ESOPs were not granted to her in her capacity as Non-Executive Chairperson of Care Health Insurance, he said.

However, these ESOP holdings find no mention in Religare's annual reports.

InGovern alleges that the options were issued even before the outcome of the Insurance Regulatory and Development Authority of India's approval was sought on the issue. The IRDAI also pointed out that Saluja's remuneration, after issuing ESOP, would not be in line with remuneration of other non-executive directors of Care, the report noted.

Meanwhile, Venugopal denies that such a transaction requires permission from IRDAI as the remuneration to the Chairman of the Board can be decided by the Board of Directors.

Hence, a resolution, "after due consideration" by the Nomination and Remuneration Committee, was passed unanimously by the Board of Care, which includes Kedaara Capital which has substantial investment to the tune of Rs 567.3 crore in Care, he said.

The reclassification of Saluja from independent director of Religare to executive director and consequent issue of ESOPs of subsidiary Care to her as an employee of REL can be seen as a "clear mechanism to reward herself by flouting regulations and keeping shareholders of REL in dark", the report alleged.

The report underscores that Religare resolution approving the remuneration dated Sept. 23, 2022 is void on grounds of failure to disclose material facts regarding Care options issued to Saluja. Accordingly, her remuneration through the allotment of Care options ought to be clawed back as per the provisions of the Companies Act, InGovern said.

However, Venugopal also said that Sunil Godhwani, erstwhile Chairman and Managing Director of REL and other senior management of the group who were eligible employees as per ESOP policy of Care health received such ESOPs as well.

The report said the cumulative options—total of 1.05 crore options—allotted to Saluja in Religare are worth Rs 230 crore. This takes Saluja's total options holding worth Rs 480 crore in addition to the compensation paid by the company.

On Nov. 9, the Burman family, owners of Dabur India Ltd., flagged Saluja's "high compensation" which is in excess of Rs 150 crore. The amount is "not in line with compensation norms by any reasonable parameters", according to a Burman family spokesperson.

Religare rejected the issue stating that it is "completely false and erroneous".