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Infosys plans fresh rupee ESOP

This has become necessary because Infosys's first ESOP is likely to be exhausted soon.

In November 1994, the company had allotted 750,000 warrants to the

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Infosys Employee Welfare Trust for its first ESOP. Most of these warrants have already been allotted.

"About 1,200 employees are currently covered by the ESOP scheme. The 750,000 warrants initially vested with the trust have almost been exhausted. We will have to announce a fresh scheme and transfer more warrants to the trust," top company officials said.

Infosys had started the current financial year with a balance of 488,000 shares available for future grants under the ESOP. "Of these, only about 92,000 are remaining. We expect even these to be allotted before the end of the current financial year," company sources said.

"We are yet to finalise any details of the second stock option plan. But the company's next annual general meeting is the earliest date by which we can have the second ESOP ready," sources said.

The new ESOP has to be approved by the company's shareholders at the AGM.

Infosys' employees have paid Rs 100 per share to convert their ESOP warrants into shares. "However, under the new ESOP plan, the employees will have to pay a higher price,'' company officials said.

Infosys' second stock option plan is expected to come under the new guidelines for ESOPs that is expected to be finalised soon.

The company is among the first to come out with an ESOP before SEBI changed the preferential allotment guidelines in late 1994.

SEBI's guidelines have disallowed companies from allotting shares at a steep discount to the market price. This has made ESOP nonviable, forcing the government to set up the Verma Committee to recommend fresh norms for ESOP.

It is expected that under the new guidelines companies issuing ESOPs at a discount would have to set off the discount in their P&L accounts.

Infosys is already adhering to this procedure in its accounts presented in accordance with US' Generally Accepted Accounting Practices.

During 1996, 1997 and 1998, the company recorded deferred compensation under its ESOP of $1.28 million, $2.02 million and $6.89 million for the difference between the exercise price of the options and the fair value of the company's shares.

This amount is being amortised on a pro-rata on a straight-line basis over the vesting period of the warrants.

Employees of Infosys Technologies, covered under the ESOP, are together worth about Rs 3.4 billion. About 1,200 Infosys employees have been allotted about 9 per cent of the company's total equity through stock option plans and a subsequent bonus issue.

At the current market price of about Rs 2,420 per share, the market capitalisation of the employees covered under ESOP works out to a staggering Rs 3.4 billion.

The Infosys management has gone on record on many occasions, stating that their objective is to create a thousand employee millionaires through the ESOP.

The company has also received government permission to issue dollar-denominated stock options.

- Compiled from the India media

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