INDIA: Employee stock options are back in vogue - 4 Jan 2010

Employee stock options are back in vogue

 

 

 

 

Value more than doubles in 2009 over the previous year.

 

 

 

 

 

 

 

K. Venkatasubramanian

If the falling markets in 2008 were a deterrent to companies issuing
stock options to their employees, 2009 has seen a comeback for this
form of compensation.

The value of stock options exercised by employees more than doubled in 2009 over 2008.

More importantly, the prices at which these options were allowed to
be exercised are lucrative compared to the current stock prices of
these companies, with gains to the tune of 19-199 per cent waiting to
be made.

In 2009, as many as 86 of the CNX 500 companies offered employee stock options, compared with 82 in 2008.

Now, that may not seem like much of an increase, but for the fact
that the amounts involved were more than twice as much. In 2009, the
total value of exercised options amounted to Rs 193.5 crore, compared
with Rs 75.7 crore in 2008.

Improving market conditions seem to have lured the beneficiaries of
these options – employees and senior management – to take advantage of
the gains to be had from the gap between the exercise price and the
market prices of options.

Although the list of companies offering ESOPs spans a wide range of
sectors, among the large-cap stock universe, banking and financial
services players dominate the list. The extent of gains to be made from
exercising these options is phenomenal in many cases.

ICICI Bank issued options that were exercised for an average value
of Rs 331.2 a share, while the current market price of the stock is Rs
875.7, a 164 per cent gain.

HDFC Bank, IDFC, and ACC are some of the other companies where

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