Proxy Advisory Firm Raises Red Flag Against Religare Enterprises

Proxy advisory firm InGovern Research has raised serious concerns regarding Religare Enterprises and its Chairperson, Rashmi Saluja. The firm alleges that Saluja has received excessive remuneration, resulting in a conflict of interest, and has also committed regulatory breaches. In a report, InGovern states that over the past 3-4 years, Saluja has received options worth over Rs 480 crore from Religare Enterprises Ltd (REL) and its subsidiary, Care Health Insurance Limited (CARE), in addition to her compensation from REL.

Excessive Remuneration and Regulatory Breaches

According to the report, shares of CARE were issued to Saluja through ESOPs, despite being rejected by the Insurance Regulatory and Development Authority of India (IRDAI). Furthermore, no approval was sought from the shareholders of REL for this issuance. InGovern also highlights that the CARE ESOPs were not disclosed in REL's annual report as part of Saluja's compensation.

In addition, InGovern suggests that detailed investigations by IRDAI and the Securities and Exchange Board of India (SEBI) are necessary to examine the excessive remuneration and potential conflicts of interest at Religare Enterprises. The report reveals that since her appointment as Executive Chairperson of REL in February 2020, Saluja has been granted a total of 1.05 crore options, currently valued at over Rs 230 crores. In CARE, where Saluja serves as a Non-Executive Chairperson, she has received excessive grants of stock options valued at over Rs 250 crores.

Contravention of IRDAI Regulations

In January 2022, CARE granted 2.27 crore ESOPs to Saluja, which contravened IRDAI regulations. These regulations stipulate that stock options can only be issued to Chief Executive Officers, Whole-time Directors, and Managing Directors. Furthermore, the ESOPs were issued without waiting for IRDAI's approval, which was sought for such issuance. InGovern's report states that IRDAI rejected the issuance of ESOPs to Saluja as it violated the regulatory limit on profit-related commission, which is capped at Rs 10 lakh per annum for Non-Executive Directors of private sector insurers.

IRDAI also pointed out that Saluja's remuneration, post the ESOP issuance, would not be in line with the remuneration of other Non-Executive Directors of CARE. Moreover, the ESOPs were issued at a deep discount, with an exercise price of Rs 45.32 per share of CARE. With these share options, Saluja now owns 2.50 percent of the share capital of CARE.

Frequent Resolutions for ESOPs and Remuneration

In REL, frequent resolutions have been tabled seeking shareholders' approval to grant ESOPs and revise Saluja's remuneration within a short span of three years. Earlier, the Burman family, which has made an open offer for REL, approached SEBI through its entities, seeking a probe into the sale of shares by Saluja on September 20, 2023, when they informed about the open offer. Religare, however, refuted the allegation, stating that Saluja had sold ESOPs after a long process triggered several days prior to the September 20 meeting.

The Burman family entities, which now collectively hold 21.24 percent in REL, have also written to SEBI regarding this matter. The Burman family, promoters of Dabur India and other entities such as Eveready Industries, had announced a Rs 2,116 crore open offer in September to acquire up to 26 percent stake in REL. Previously, the independent directors of REL raised red flags, alleging fraud and other breaches by Burman family entities.

The allegations raised by InGovern Research regarding excessive remuneration, regulatory breaches, and potential conflicts of interest at Religare Enterprises are serious and warrant thorough investigations by the relevant authorities, including IRDAI and SEBI. The frequent resolutions seeking shareholders' approval for ESOPs and remuneration revisions also raise concerns about corporate governance practices at the company. Transparent and ethical practices are crucial for maintaining investor confidence and ensuring the integrity of the capital markets.