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MCX IPO to make staff millionaires

February 17, 2012 11:25 IST

Several senior officials of Multi Commodity Exchange of India (MCX) are set to become millionaires, as India's first ever share sale by an exchange opens next week.

The exchange granted 1.96 million stock options under two employee stock option (Esop) schemes in 2006 and 2008 to those eligible, according to regulatory filings.

According to the prospectus, 321,877 options were granted and exercised under the Esop scheme of 2006. Another 1.64 million options were granted under Esop 2008.

"The employees may sell the shares held by them on exercise of options within three months after the listing," the company said.

At the upper end of this price band of Rs 860 to Rs 1,032 per equity share announced on Thursday, these options are worth Rs 203 crore (Rs 2.03 billion).

Paras Ajmera and V Hariharan, directors of the company, have exercised 437,500 options each.  At the upper end of the price band, these two will be richer by around Rs 45 crore (Rs 450 million) each.

Former CEO Joseph Massey (18,750), incumbent CEO Lambertus Rutten (12,500) and chairman Venkat Chary (6,250) are other directors holding Esops. All these were exercised at a price of Rs 144, amounting to a gain of seven times the offer price.

Nine other key managerial personnel were also issued a significant number of options. Of these directors and senior managerial personnel, only Massey, Sumesh Parasra-mpuria, director of business development, and Dipak Shah, director-market operations, have said they will sell shares within three months of listing.

While Massey intends to sell 10,000 shares fetching a little over Rs 1 crore, the others intend to sell 6,250 and 2,000

shares, respectively, on listing.

In addition, up to 250,000 shares have been reserved for eligible employees in the IPO. The issue will open on February 22 and close on February 24.

The shares will be listed on the Bombay Stock Exchange.

Esops, originally popular as a retention tool in the attrition-prone information technology (IT) sector, has become popular in the non-IT segment, too. Recently, Cairn India CEO Rahul Dhir raised Rs 51.26 crore ($10.5 million) by selling half his stake in the oil and gas producer, ahead of receiving another round of stock options.

The initial success of SKS Microfinance in 2010 had resulted in a windfall for its mid-tier employees holding stock options, with many earning millions.

Apart from the senior professionals at SKS, even junior staff like loan officers and branch officers (who typically get an income of Rs 1-2 lakh per annum) are believed to be richer by several multiples.

Some of these belonged to far-flung areas, such as Medak and Warangal (Andhra Pradesh), Lakhisarai (Bihar), Bolangir (Orissa), Sasaram (Bihar) and Bokaro (Jharkhand). Nearly 5,000 employees in SKS hold stock options issued at various stages and at different prices.

Infosys had, in 1994, put in place an Esop which, with an American Depository Receipt scheme in 1998 and one in 1999, gave shares to a little over 18,000 employees.

This created hundreds of dollar millionaires and thousands of rupee millionaires. Drivers, office assistants and secretaries got shares, too, and benefited hugely. It soon became the most successful scheme in India and set a benchmark for other companies.

N Sundaresha Subramanian, Palak Shah in Mumbai