A day after the Burman family, the largest shareholder of Religare Enterprises Limited (REL), announced an open offer to buy more shares to take control of the financial services conglomerate, Rashmi Saluja, executive chairperson of the company, acquired around 8% stake in its wholly-owned shadow bank Religare Finvest Limited (RFL), through an Employees Stock Option Plan (Esop) award, documents reviewed by ET reveal.
The award in the unlisted subsidiary ascribed its value in a band of Rs150-260 crore. Previously, proxy advisory firm InGovern had estimated the Esops awarded to Saluja in Religare Enterprises as well as its health insurance subsidiary Care Health Insurance to be worth Rs480 crore. Together with the thus far undeclared award of stock options in Religare Finvest, the total compensation earned by Saluja via Esops could be between Rs630 and Rs740 crore. This is in addition to the annual salary and places Saluja among the highest paid executives in Indian corporate history.
This stock award has become the latest flashpoint in the protracted battle of attrition that has broken out between the Burmans and the Religare board, led by Saluja, which has seen both sides approaching regulators against the other. Burmans, the billionaire promoters of FMCG major Dabur, are trying to gain control of Religare. The incumbent board, led by Saluja, is resisting. While the board has written to regulators, as ET first reported on 9 November, arguing the Burmans were unfit to take over a conglomerate that possesses licenses to operate in regulated sectors such as housing finance, stock broking, health insurance and shadow banking, Burmans have accused Saluja of insider trading and abusing her position to gain excessive remuneration. Burmans have denied the accusations and Saluja has denied insider trading allegations and said the remuneration was cleared by the board and all shareholders.The insider trading allegations pertain to the sale of shares in REL by Saluja and other executives on 21 September, a day after a representative of the Burman family informed Saluja of their intention to make an open offer, according to a complaint to the markets regulator by entities controlled by the Burman family. The Religare board has defended the sale by Saluja saying it was set in motion much earlier. Religare is a widely-held firm and the board comprises on independent directors.
Special Business
The acquisition of an 8% stake in Religare Finvest via stock grants, which happened on 26 September, a day after the Burmans formally announced their open offer for more shares in Religare at Rs235 apiece, broke takeover rules, the Burmans allege. In a statement, Saluja denied this, and said the grant was lawful.
These ESOPs were approved as part of “special business” during the annual general meeting of RFL on September 26.
The Securities and Exchange Board of India (Sebi) takeover regulations prohibit any allotment or issuance of securities in a company or its subsidiaries during an open offer. This can only be allowed if the shareholders of the target company approve a special resolution to this effect.
“This is nothing short of daylight robbery of the shareholders of the parent company Religare Enterprises,” a Burman family spokesperson told ET.
Saluja rejected this, saying that the grant of ESOPs was related to a proposal from four years ago.
“The approval sought at the AGM of RFL held on September 26, 2023, was to seek enabling approval of shareholders for the proposed grant of ESOPs of RFL to Dr Rashmi Saluja under the RFL ESOP Plan 2019. The notice of aforesaid AGM was issued on September 1, 2023, and submitted to the BSE accordingly by RFL,” Saluja’s office said in a statement to ET.
The statement also said that approval for the grant of ESOPs was in any case received a year before.
“No specific approval of REL shareholders is required for the issuance of ESOPs of subsidiary companies to Dr Rashmi Saluja,” her office said. “The approval of REL shareholders for Dr Rashmi Saluja being entitled to receive ESOPs of subsidiaries was obtained on September 23, 2022.”
‘No disclosure’
The RFL resolution, along with others, was put to vote and passed by show of hands, the documents reveal. There was no disclosure on the granting of the ESOPs to REL shareholders. Notably, REL’s own AGM took place on September 27, during which a resolution reappointing Saluja as chairperson was approved. The AGM notice issued to the shareholders of REL on September 5 did not mention any proposed ESOP issuance to Saluja by RFL even though notice for the RFL AGM was issued on September 1.
Earlier, 10.5 million ESOPs of REL and 22.7 million ESOPs of CHIL, another arm of REL, were granted to Saluja.
“It is an unjust infringement upon the interests of the REL shareholders. The conduct exhibited by the chairperson and board of REL and RFL transgresses legal and ethical standards as the issuance of the ESOPs amounting to 8% in a material subsidiary post launch of an open offer requires careful scrutiny,” the Burman family spokesperson said. “Leave aside approvals, it is alarming that there is no disclosure on the stock exchanges regarding such a substantial equity allocation… It is a clear case of economic impropriety, utilizing deceptive means to defraud shareholders and requires a thorough investigation into these actions.”
Four out of six directors are common to the REL and RFL boards.
When the Burman family announced the open offer on September 25, the REL board had on the same day welcomed it as a “positive step reflective of the strong business platform on which the company stands.” But a few weeks later it turned against the bid, saying the open offer price was too low.
