Infosys to reward staff with shares to mark its 30th year

Infosys to reward staff with shares to mark its 30th year

Bangalore: Infosys Technologies Ltd has unwrapped a gift for staffers to mark its entry into its 30th year on 2 July.

Each of the 113,000 employees of India’s second largest software exporter will get five free shares plus an additional share for each year they have put in with the company. Infosys did not disclose the total number of shares it would be dishing out, but it would be a minimum of 569,000 shares worth Rs158.66 crore, going by the number of employees on its rolls and the Wednesday closing price of the technology bellwether at the Bombay Stock Exchange.

Also See Infosys in 30 years (Graphic)

“It is celebrating with the employees," said V. Balakrishnan, chief financial officer at Infosys.

Infosys has repeatedly said it aims to share wealth with its employees, as in the case of a pioneering stock option plan that was later discontinued and a Rs126 crore special bonus paid out to 58,000 employees when the firm turned 25 in 2006.

The shares will be distributed in August by the Infosys Employee Welfare Trust, an independent body which holds a corpus of shares, Balakrishnan said, without disclosing the number of shares the trust holds. “They have the shares. There are certain shares owned by an old shareholder who has given them to employees. The trust is just transferring them to the employees."

T.V. Mohandas Pai, director of human resources and training confirmed that the Employee Welfare Trust had received shares owned by a former director, V.A. Sastry, and these were the shares which would be distributed among the employees by the trust. He did not reveal how many shares Sastry had turned over to the trust. Sastry did not respond to calls or phone messages.

Equity analysts do not think the new shares will have a major impact on equity prices.

“From an equity dilution point of view, this will have minimal impact. At five shares per employee on an employee base of a lakh, we are looking at about half a million new shares being added to the current 574 million outstanding shares, translating to about 0.09% dilution," said Shashi Bhusan, senior research analyst at Mumbai based brokerage Prabhudas Lilladher Pvt. Ltd.

Infosys was started by chairman N.R. Narayana Murthy and six others with Rs10,000 borrowed from his wife Sudha.

E. Balaji, chief executive officer of Ma Foi Management Consultants Ltd, a recruitment firm, said that the move to reward employees is likely to help the company. “The IT market has been depressed for some time now. With the opening of the market, the attrition has also increased as there are more jobs in the market. Infosys’ current move could be a step towards wealth sharing to reward existing employees. This could also help the company in retaining their long-serving employees."

An analyst with a brokerage firm said that at the time of issuing employee stock options, a certain number of shares are held by the trust as part of the indemnity agreements to cover up the tax liability in case the employee doesn’t pay tax on them. “The corpus of the EWT (Employee Welfare Trust) could have been formed partially by such indemnity agreements," said the analyst, who did not want to be identified.

“The stock has split several times and it’s possible that a major part of the corpus of the trust has come because of this," said the analyst quoted earlier.

Lison Joseph in Mumbai and Surabhi Agarwal in New Delhi contributed to this story.