Notice of Postal Ballot of API Holdings (PharmEasy) for FY24-25ph

The parent of PharmEasy, API Holdings Limited, has issued a Postal Ballot Notice dated August 14, 2024, to seek shareholder approval on various corporate, director remuneration, and employee stock option matters for FY2024-25. The resolutions shall be considered only by remote e-voting in accordance with the provisions of the Companies Act, 2013, and the rules made thereunder. (API Holdings – Postal Ballot Notice)

The e-voting period started on August 16, 2024 at 9.00 a.m. IST and closed on September 14, 2024, at 5:00 p.m. IST September 14, 2024 was also the date on which the proposed resolutions would be considered to have been passed, subject to requisite shareholder approval. The company has appointed Central Depository Services Limited (CDSL) for e-voting facility.

Key Details of the API Holdings Postal Ballot

The voting rights were based on shareholders' equity shareholding as of the August 9, 2024, cut-off date. The notice was sent electronically to the eligible shareholders, and physical copies of postal ballot forms were not sent.

What Was the Postal Ballot About?

The 16 resolutions covered three broad areas:

Corporate governance and board appointments

Remuneration of directors and senior management

Modification and creation of Employee Stock Option (ESOP) pools

The proposals included both ordinary resolutions and special resolutions, with shareholder approval required for the matters specified in the notice.

Board and Director Appointments

The postal ballot was for the approval of appointment of Dr. Ranjan Pai and Mr. Shyam Powar as directors liable to retire by rotation. Both were appointed as additional directors, subject to shareholder approval, on May 15, 2024. 

The notice also proposed appointment of Mr Dhaval Shah and Mr Hardik Dedhia as whole-time directors with their proposed tenure up to September 30, 2026.

The proposed remuneration for Dhaval Shah, Hardik Dedhia included a maximum fixed salary of ₹45 lakh per annum for FY2024-25, FY2025-26 and FY2026-27 up to September 30, 2026. The notice also proposed a one-time payment of up to ₹1.35 crore each for services rendered in FY2023-24.

Remuneration of Siddharth Shah

Another special resolution concerned the remuneration payable to Mr. Siddharth Shah, Managing Director and CEO of API Holdings, for FY2024-25.

The proposed annual remuneration consisted of:

The proposed remuneration was subject to shareholder approval, ratification and waiver as specified in the resolution. The notice also provided that the approved remuneration would be treated as minimum remuneration in the event of inadequate profits, subject to the applicable provisions of the Companies Act.

Remuneration of Dharmil Sheth and Harsh Parekh

The postal ballot also covered remuneration payable to Mr. Dharmil Sheth and Mr. Harsh Parekh for the period during which they served as whole-time directors in FY2024-25.

For the period from April 1, 2024 to May 15, 2024, remuneration of up to ₹6 lakh each was proposed on a pro rata basis.

In addition, the company proposed a one-time payment of up to ₹1.35 crore each for services rendered during FY2023-24.

Changes to the ESOP Structure

A substantial part of the postal ballot concerned the company's Employee Stock Option Plan 2020.

One of the suggestions was about API ESOP Pool 18 which was for 13.75 cr ESOPs post adjustments for share split and bonus issues. The company proposed to change the vesting condition so that vesting would not depend on the company being listed or its shares being traded on a recognized stock exchange. The revised condition kept the minimum one-year time period between grant and vesting. 

Another proposal concerned API ESOP Pool 21, which originally comprised 8.25 crore ESOPs, with each option exercisable into one equity share at an adjusted exercise price of ₹10.83.

The company proposed allowing the Nomination and Remuneration Committee to determine the exercise price at the time of grant, rather than keeping it fixed at ₹10.83. The stated objective was to align the exercise price with the company's then-current fair market value and the price at which the latest fund raise had taken place. 

New ESOP Pools Proposed

The postal ballot also included proposals for additional ESOP capacity.

The company proposed:

• Adding 2.75 crore ESOPs to API ESOP Pool 25.

• Creating ESOP Pool 26 with 45 crore ESOPs.

• Creating ESOP Pool 27 with 45 crore ESOPs.

• Creating ESOP Pool 28 with 64.50 crore ESOPs.

The explanatory statement said Pools 26 and 27 were intended to provide ESOPs to identified founders and eligible employees under the company's ESOP Plan 2020, subject to the terms and conditions specified in the plan and shareholders' agreement.

The proposals therefore represented a substantial expansion of the company's potential ESOP pool. This does not mean that all of these options were immediately granted or converted into equity shares; the notice dealt with the creation, modification or authorisation of option pools and future grants.

ESOP Grants to Subsidiary Employees

Another resolution sought approval for API Holdings to grant ESOPs to eligible employees and directors of its subsidiary companies under the API Holdings Employee Stock Option Plan 2020.

The proposed arrangement allowed options to be granted in one or more tranches, subject to applicable laws, the ESOP plan, and terms determined by the Board and/or the Nomination and Remuneration Committee. Each vested ESOP would be exercisable into one equity share of API Holdings, subject to the applicable exercise price and other conditions. (API Holdings – Postal Ballot Notice)

A further resolution addressed situations where ESOP grants to an eligible employee or founder in a particular year could equal or exceed 1% of the company's issued share capital, excluding outstanding warrants and conversions.

Why the Postal Ballot Was Significant

The August 2024 postal ballot covered more than routine director appointments.

It combined board appointments, senior-management remuneration, changes to existing ESOP arrangements, and the creation of substantial new ESOP pools.

The ESOP proposals were particularly notable because they expanded the company's ability to use equity-linked incentives across founders, employees and subsidiary employees. At the same time, the remuneration resolutions provided shareholder approval for the compensation arrangements of key executives and directors.

Outcome of the Postal Ballot

The voting process concluded on September 14, 2024, and the Scrutinizer's Report dated September 16, 2024 recorded that all 16 resolutions were approved by the requisite majority. The voting was conducted through remote e-voting, with CDSL providing the electronic voting system. (API Holdings – Scrutinizer's Report)

Resolutions passed include appointment of the proposed directors, key management personnel remuneration arrangements, amendments to ESOP Pool 18 and Pool 21, addition of options to Pool 25 and creation of ESOP Pool 26, 27 and 28.

API Holdings Postal Ballot FY24-25: Key Takeaways

The August 14, 2024 postal ballot notice covered 16 shareholder resolutions relating to governance, director remuneration and employee stock options.

The voting window ran from August 16 to September 14, 2024, with CDSL acting as the e-voting service provider.

The proposals included the appointments of Ranjan Pai and Shyam Powar, the appointment and remuneration of Dhaval Shah and Hardik Dedhia as whole-time directors, and remuneration approvals for Siddharth Shah, Dharmil Sheth, and Harsh Parekh.

A significant portion of the notice concerned ESOPs, including changes to existing pools and the proposed creation of 45 crore-option Pool 26, 45 crore-option Pool 27 and 64.50 crore-option Pool 28.

The subsequent Scrutinizer's Report confirmed that all 16 resolutions received the required shareholder approval on September 14, 2024.