Insurance regulator IRDAI has directed Care Health Insurance Ltd (formerly Religare Health Insurance) to buy back 7.57 million shares allotted to Rashmi Saluja, non executive Chairperson of Religare Enterprises Ltd (REL). The shares were allotted at ₹45.32 each.
It has also imposed a fine of ₹1 crore on Care Health ( a subsidiary of REL), besides directing it to cancel the ESOPs that have not so far been exercised by Saluja or remained unvested.
IRDAI said In an order dated July 23 — filed with exchanges — that the issuance of stock options of Care Health to Saluja in her capacity as the executive chairperson of REL is a violation of the Insurance Regulatory and Development Authority Act, 1999, and circulars, guidelines and directions issued thereunder.
Also, Care Health has been prohibited from any future grant of stock options.
History of ESOPs
In 2021, Care Health had sought IRDAI approval to issue stock options to Saluja, as the non-executive director (NED) of the health insurer. IRDAI had rejected the request as the remuneration guidelines of 2016 did not permit payment of “profit related commission” to NEDs and sitting fees. Despite this, Care health issued 22.7 million ESOPs, of which Saluja exercised 7.57 million by October 2023. In May this year, IRDAI had issued a show-cause notice on this matter.
Care Health had conveyed to IRDAI that Saluja was granted ESOPs in her capacity as executive chairperson of Religare Enterprises Limited and not as non-executive director of Care Health. IRDAI did not accept this explanation and concluded that the Care Health move was a violation of the regulations.
IRDAI noted in its order that payment to Saluja, who is an NED and chairperson of Care Health and a common director of an insurance intermediary, required the prior approval of the authority.
Insurers are also required to obtain prior approval for providing remuneration to NEDs who are common directors with insurance intermediaries. Saluja is also director with the insurance intermediaries Religare Finvest and Religare Insurance Broking Ltd.
“The fact that Rashmi Saluja held the position of the executive chairperson of the REL does not dilute the requirement of complying with the directions of the IRDAI and the provisions of the regulations, guidelines, circulars issued by the IRDAI”, said the IRDAI order.