Satyam Esop-holders in deep sea as valuation takes a hit

Satyam Computer Services employees, who hold stock options (based on Indian equity shares), lost as much as Rs 221 crore in a single day after investors dumped the stock on Wednesday. The loss is as high as Rs 640 crore over the past one year.

According to the financial data made available by the company in the September quarter, employees were holding 1.59 crore employee stock options (Esops). Each option can be exercised to obtain one share.

The stock of the company lost more than three-fourth of its value in a single trading session on Wednesday. A back-of-the envelope calculation shows the notional loss the employees suffered is almost Rs 221 crore.

The company had also issued 17.25 lakh stock options based on its American depository shares (ADS). The Satyam ADS lost over 90% in early trade on Wednesday. For employees who held the ADS-based options this is a loss of over $ 14.5 million (Rs 70 crore) in a single day. What is more scary for the Satyam Esop-holders is that the options would become null and void if the company ceases to exist.

However, if the company is acquired by another firm, Esop-holders might get shares of acquiring company on conversion of the options. Whatever it may be, the employees like many other investors had burnt their fingers in the entire process.

Meanwhile, experts feel the Satyam imbroglio may impact granting of stock options in India. Going ahead, companies would have to be more nimble while devising the stock option plans, said Hewitt Associates Asia Pacific leader for executive compensation and corporate governance Shekahr Purohit.

���For growth economies such as that of India, (stock) options still hold a promise. However, I feel stringent growth conditions attached with option plans may become norm of the day,��� he said.



Employee benefits related to Esops need to be oriented towards achieving definite financial goals, he added. ���Companies need to readjust the targets based on economic condition rather than the exercise price of options.���