Cash-rich Care Health is the largest subsidiary of Religare Ltd, for which the Burmans announced an open offer in 2023. Saluja is non-executive chairperson of Care Health, and executive chairperson of its parent Religare Enterprises Ltd (REL). After initially welcoming the Burmans’ open offer, the Religare board rejected it, sparking a range of charges and counter-charges.
In a letter to the Care Health board on 13 May, four Burman family investment firms wrote that the board granted 22.7 million stock options to Saluja, even after the Insurance Regulatory and Development Authority of India (Irdai) had rejected its proposal. Mint has seen a copy of the letter.
The Burman family owns FMCG major Dabur Ltd and a host of other companies. It holds over 25% in Religare through four associate firms—M.B. Finmart Pvt Ltd, Puran Associates Pvt. Ltd, VIC Enterprises Pvt. Ltd, and Milky Investment & Trading Co.
In response to Mint’s queries, a spokesperson for Religare said Care Health has already provided a comprehensive reply with documentary evidence to Irdai on allotting stock options to Saluja.
The Burmans’ letter alleges that Saluja “continues to exercise these illegal CARE options and sell the resulting shares of CARE to third parties and, in the process, stands to monetize from such ill-gotten CARE options”.
The Burmans asked the Care Health board not to issue any further equity shares arising from the conversion of any of the 22.71 million-odd Care Health stock options granted to Saluja, and not to permit the transfer of any shares that have in the past been issued in the exercise of the Care options.
The letter also asked the Care board to issue a public notice not to trade in any of Saluja’s equity shares in Care, and freeze payments of “all dividends and voting rights attached to shares arising from the conversion of the CARE options”.
The family has threatened legal action against the board members if these steps are not followed, “including but not limited to, seeking recourse from the members of the Board through the recovery of monetary claims, directly, or indirectly by having claim over your personal assets”.
A Burman family spokesperson said, “Rashmi Saluja has derived an aggregate value in excess of ₹400 crore from the REL Group, whilst REL has had inadequate profits.”
“The shareholders have raised these concerns with the CARE board and IRDAI, and are actively exploring legal avenues to recover the value loss. It defies business logic that the CARE board decided to compensate a non-executive director with ₹250 crore, despite the Irdai rejecting the allotment of these options,” the Burmans’ spokesperson added.
The Religare spokesperson said, “We would like to clarify that all these attempts being made by Burmans are nothing but their malafide continuous attacks on Dr. Rashmi Saluja’s reputation, with the only aim to remove her from Religare and gain control by hook or crook.”
“The acquirers (Burmans) have been repeatedly raising the same concerns through a motivated smear campaign which not only renders them liable for strict and appropriate legal action but also makes them liable for regulatory action for leaking confidential documents and inter-regulatory correspondences in view of the adverse effect on the integrity of the stock market and impact on the shareholder value,” the Religare spokesperson said.
Queries sent to Irdai remained unanswered.
A matter of options
In its 13 May letter, the Burman family’s investment firms argued, “The acquirers fail to comprehend how bestowing exorbitant payouts upon REL employees, particularly those holding non-executive roles in CARE, contributes to shareholder value creation. In reality, it appears that value is being generated primarily for REL employees at the expense of CARE shareholders.”
Meanwhile, Religare’s spokesperson said the board of Care Health has denied all the allegations and assertions by the Burmans as baseless and “categorically stated that the grant of ESOPs to Dr. Rashmi complies fully with not only all legal requirements but also all standards of propriety”.
“The Board of CHIL reserves its right to take appropriate legal action against the Acquirers in this regard,” the spokesperson said.
Care Health is worth at least ₹10,000 crore, based on the price of its shares at ₹110 apiece in its last rights issue in 2022.
On 31 December 2021, shareholders of Care Health sought approval from Insurance Regulatory and Development Authority of India (Irdai) to grant 27.76 million stock options to Saluja, which the regulator rejected in May 2022. Thereafter, Saluja was granted 22.71 million stock options in June 2022 by the board of Care Health, which are now worth at least ₹250 crore.
Care Health, while granting the stock options to Saluja and others at Religare, had stated that the board was “conscious of providing motivations for REL employees and has designed the vesting schedule of the ESOPs to align with shareholder value creation”.
The background
On 25 September 2023, the Burman family announced its plan to take over Religare Enterprises via an open offer, which is currently awaiting markets regulator Sebi’s approval. Currently, the Burman family has an indirect holding in Care by virtue of its stake in the insurer’s parent Religare. Post the open offer, the family will effectively be the owners of Care Health. The Burmans recently got the competition commission’s nod to take over REL.
The debate over stock options erupted after the Burmans announced their intention to take over Religare on 25 September 2023. After the Saluja-led Religare board opposed the proposed takeover, the Burmans alleged that Saluja received unusually hefty stock options from Care Health.
The Religare board has claimed Burmans’ offer price of ₹235 per share to be low. Currently REL shares are trading at ₹214.55 apiece (on Friday).