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Bharat Kumar

Chennai , Dec. 21

WHAT pleasure to break away from work and steal a look at how your stock has performed, on the stock exchange Web site. The exultation on a price rise, or the sigh that follows a price slump.... Software industry employees are getting back to experiencing these small pleasures.

Share prices of some companies have gone up and with them, the options that employees exercise.

Over 3,000 employees of Satyam have exercised their options - of which over a million have been granted this year - translating to about 8,31,019 shares. Compare this with the 2,800 shares that were converted the previous year. And, we aren't even nine months into the current financial year.

The reason is obvious. Satyam's stock price has gone up - after swinging either way in the middle of this calendar - from Rs 278.95 on December 12, 2002 to Rs 343.20 the same date this year. Infosys Technologies has also seen a rise in shares allotted to those exercising their stock options. Over 1,53,874 shares have been allotted in the last couple of months alone compared to 56,948 shares last year.

Mastek and Wipro have not shown such activity in the allotment of shares from exercise of stock options. Both their shares have seen slumps in the last 12 months.

Here's how an employee stock option works: The company allots options to employees at a certain price related to the prevailing price at the time. The options are locked in for a period, say two or three years. At the end of the period, the option "vests" with the employee. If the stock price has gone up in that time, the employee benefits by converting his options into shares and selling them.

So, will stock options again become attractive? Would that result in cutting down on salary hikes? Not many feel so.

Mr Mohandas Pai, Chief Financial Officer, Infosys Technologies, told Business Line,

"There is no discernible trend. Shares allotted during the year depend on the strike price and the number of shares getting vested in a year. Entry-level salaries are not under pressure for the industry currently. Though, recruiting and retaining middle level managers continues to be a challenge."

Mr Pai clarified, "Because of some proposed changes in the accounting rules, grant of options to employees has been very less in the recent past." Also, it is learnt that Infosys employees' in a feedback to the management have preferred salary hikes to options due to volatility in the stock markets.

Satyam Computer feels that it is too early to call the renewed interest a trend.

A spokesperson also says, "We do not see the trend altering wage increases in any way. Also, the earlier attraction towards options is not prevalent now."

PP is the trend now

WE'VE heard of the employee stock option plan (ESOP). Now, ESPP (employee stock purchase plan) seems an emerging favourite.

Here's how it works: Your employer gives you a plan period, say 6 months, in which, you contribute a monthly sum to a fund. At the end of that period, the company allots shares to you - in exchange for the sum - at a 15 per cent discount. The buying price for the employee is the lower price between the start and end date of the period. If you buy 1,000 shares on June 30 at the end of a six-month plan, and the share price was Rs 500 on Jan 1 and Rs 600 on June 30, you get the shares at Rs 425 each. If the share prices on those two dates were reversed, you would still make a profit of Rs 75 per share, if you sold it.

Networks Associates International offers this plan for its Indian employees. Says, Ms Aparna Ballakur, HR business partner, McAfee Security Engineering Center, a Network Associates Centre, "Over 50 per cent of our 190 employees participate in this plan. In this plan, the employee puts money on the table, unlike in an ESOP." As a result, she says, the employee takes an interest in the company's operations and sees the company's performance linked to the benefits. According to her, "The employee interest in the company's operations and performance also increases. If the stock falls for one day, we get so many queries. It's healthy."

In NAI's case, the stocks are listed in the US making this more attractive.

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