The Hindu Business Line : Common stock option scheme unviable for oil PSUs

New Delhi, Nov 25 The Petroleum Ministry, which is looking at a common employees stock option (ESOP) policy for State-owned oil companies, may have to allow each entity to adopt its own implementation route. “The varying equity structures of these companies would make it difficult for them to adopt a common scheme for offering ESOPs as the move could dilute promoters’ stake,” official sources said.

Enthused by a proposal from Indian Oil Corporation Ltd (IOC) to offer employees ESOPs as incentive, the Ministry has asked the other entities — Hindustan Petroleum Corporation Ltd (HPCL), Bharat Petroleum Corporation Ltd (BPCL), ONGC and GAIL (India) Ltd to also work out a package. Currently none of the oil PSUs has an ESOP scheme.

According to IOC’s proposal, shares will be allotted directly to employees at the prevailing market price on the date of allotment. The company has already got board approval. “The other details of ESOP scheme would be worked out by the remuneration committee of the company’s board once it gets the nodal Ministry’s nod,” Mr V.C. Agrawal, IOC Director, HR said. ESOPs will be offered based on each employee’s performance and post. The ESOPs will not result in any cost to the company.

Trust plan

On the other hand, HPCL, according to sources, may propose formation of a trust to buy shares from the stock market before offering to employees. Unlike IOC and BPCL, HPCL does not have additional shares to offer. Besides, fresh equity may dilute promoter stake from the present 51.01 per cent. The HPCL board has considered the proposal, and the implementation details have to be worked out, sources said.

“IOC had initially thought of adopting the trust route, but it was not found very viable. Besides, issue of fresh equity to employees in case of IOC would be diluting promoters’ stake, which currently stands at 80.35 per cent, very marginally by 2 per cent. Therefore, we do not foresee any problem,” Mr Agarwal told Business Line.

Government equity holding in IOC has been decreasing due to the merger of its subsidiaries with itself and, following the merger of Bongaigaon Refinery & Petrochemicals with the company, it is expected to further dilute to 78.92 per cent.

BPCL already has a trust. The trust holds 9.33 per cent stake; with Government share being 54.93 per cent, the total comes to 64.26 per cent.

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