Many top executives of India Inc have cashed out their existing holdings to exercise new stock options, which were granted as part their total compensation. In order to avail the securities granted through options, employees are required to exercise such options before their expiry.
V. Vaidyanathan, MD & CEO of IDFC First Bank, sold shares worth Rs 479 crore as he intends to buy new shares of the bank through exercise of options and for paying income tax.
“These options were originally granted to me by Capital First and the same were close to expiry. So, I had to pay Rs 229 crores to the bank for subscribing fresh shares of the bank,” Vaidyanathan told CNBC-TV18. After exercising new options, his holdings in IDFC First bank will increase to 1.04 percent from 0.58 percent, said the private lender in a stock exchange filing on Monday.
According to data sourced from the BSE, employees of many blue chips too had done similar exercise in the past three months. For instance, between July 31 and August 1, Erez Israeli, the CEO of Dr. Reddy's Laboratories, enchased Rs 110 crore by offloading nearly two lakh shares of the company, while he bought similar worth of shares a day after.
Even Thierry Delaporte of Wipro, the highest paid CEO in the information-technology sector, discarded shares worth Rs seven crore in July and August to acquire 3.36 lakh shares of the company, which was valued at Rs 14 crore.
Further, Mohit Joshi, who left IT major Infosys in March to join Tech Mahindra had disposed of and acquired Infosys’ shares worth Rs 38 crore during the month, showed BSE data.
Employee Stock Ownership Plan (ESOPs), which form a sizable portion of overall compensation in startups, information technology and private banks, are mostly used to attract young talent. While employees of such firms can enjoy the ownership in the firm that they work, it also helps the employer to retain good talent.
While shares of Infosys are trading at about 25 percent lower to their record highs, IDFC First Bank and Dr. Reddy's Laboratories are trading at their record highs. The stock of Wipro climbed a little over one percent on Monday to hit its 52-week high of Rs 437.40 on the BSE.
Since Chief Experience Officers (CXO) have only their compensation to fall back on, it is but logical that they would need to sell some shares to subscribe to fresh entitlements. Therefore, investors should not be spooked or distracted by such selling by Key Managerial Personnels (KMP). They should focus on the fundamentals of the business.
First Published: Sept 12, 2023 3:40 PM IST
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