IRDAI puts Care Health Insurance on notice over ESOPs to Saluja

IRDAI Issues Notice to Care Health Insurance Over Unauthorized ESOPs to Chairperson Saluja.

Expert Analysis: 

• Regulatory Action: India's insurance regulator IRDAI issued a show cause notice to Care Health Insurance, a Religare Enterprises subsidiary, over stock options granted to Religare chairperson Rashmi Saluja.

• Board Conflict: The Religare board and Dabur's Burman family are in a protracted control battle, with the Burmans accusing the board of unlawfully granting stock options to Rashmi Saluja and alleging non-compliance with IRDAI regulations.

• IRDAI Directive: Stock options were issued to Rashmi Saluja despite IRDAI's May 2022 directive not approving Care from granting ESOPs to her as a non-executive director.

• ESOP Value: Despite IRDAI guidelines capping non-executive director payments at ₹10 lakh per year, Care issued ESOPs to Rashmi Saluja as a Religare Enterprises employee, which IRDAI views as defiance of its directives.

• Regulatory Consequences: The company faces a show cause notice demanding justification for avoiding penalties and proceedings under the Insurance Act and IRDAI Act 1999.

• Investigation into Stock Options: ET reported that IRDAI is investigating the issuance of stock options worth ₹250 crore to Rashmi Saluja by Care Health, representing approximately 2.5% of the insurer's unlisted shareholding.

• Discrepancy in Share Pricing: Proxy advisory firm InGovern reported that Care Health Insurance issued stock options at an exercise price of ₹45.32 per share in January 2022, while the rights issue that year was priced at ₹110 per share.

• Burman Family Allegations: The Burman family, the largest shareholder of Religare Enterprises claims 22.7 million options were issued illegally and sought to cancel these stock options.

• SAT Compliance Directive: The Securities Appellate Tribunal (SAT) directed Religare Enterprises to apply for an open offer and change in control by July 22, following orders from the Securities and Exchange Board of India (Sebi) issued on June 19, 2024.