Mumbai: In a bid to boost its institutional broking business and expand across Asia, domestic brokerage India Infoline Ltd, or IIFL, has issued 36 million shares as stock options to four key employees hired from regional securities house CLSA Asia Pacific Markets in 2007.
The employee stock options, or Esops, have been issued at Rs45.30 per share, amounting to Rs163 crore. “The Esops were issued after the earlier warrants lapsed unexercised,” said R. Mohan, chief compliance officer of the brokerage.
IIFL share prices have slumped some 90% from January 2008 to Rs41.50 in Friday’s trade.
A warrant entitles the holder to buy stock of the issuer company at a specific price. Esops are a form of non-cash compensation offered by a company to employees, who stand to benefit if the stock price rises.
At the time of hiring, these four employees—Bharat Parajia, H. Nemkumar, Aniruddha Dange and Vasudev Jagannath—were offered Rs44 crore sign-on bonus. In July 2007, warrants at a conversion price of Rs427 were issued through a preferential allotment. The four employees, however, will take a hit of Rs10 crore with the amount paid upfront in 2007 to subscribe to the warrants forfeited.
Mohan said there was no truth to speculation about friction between the IIFL management and the four executives over the Rs10 crore loss. “They are now our permanent employees and this (Esops) is offered to retain them,” Mohan said.
Parajia and Nemkumar have been allotted 10 million shares each, while Dange and Jagannath were given eight million each. “When exercised, the Esop will dilute IIFL’s equity by 10.3%,” said Mohan.
IIFL’s chairman Nirmal Jain and its co-promoter R. Venkataraman were not available for comment when contacted on the phone.
The conversion price of the warrants had come down to Rs88, after the one-to-five stock split on 8 August 2008, which saw its share price coming down from Rs731 to Rs151. The warrants lapse after 18 months and cannot be reissued.
On the basis of market capitalization, IIFL is currently India’s fourth largest publicly traded brokerage. Since the four joined the board, IIFL’s institutional broking volume has risen significantly. Singapore-based Parajia is the seniormost among the four. Along with another former CLSA official Abhijit Raha, Parajia played a key role in shaping CLSA as the biggest institutional brokerage in the region.