BSES shelves Esop plans citing poor market conditions

Sanjay Jog

Mumbai, Aug 21: THE Mumbai-based power utility BSES has put on back burner its plan to offer employees stock option (Esops) in view of depressed stock market conditions. Instead, the company, which has earned a profit of Rs 99.64 crore for the quarter ended June 30, has decided to provide performance-based awards comprising promotions and monetary benefits to its 4,800 employees.

BSES sources told The Financial Express that the shareholders had given their assent for the company’s Esop proposal at the last year’s annual general meeting. A high-level internal committee had also gone into the issue in depth.

Going by the Sebi guidelines, various options to offer ESOPs comprising six months’ average share price as offer price were considered by the committee. It was also discussed that if the share price slides, employees will be the ultimate loser as they will have to pay the difference between the offer price and the decreased one.

Sources said that there was no point in pursuing ESOPs at this point of time, especially when the stock markets are not showing any upward trend. The issue is likely to be discussed at the company’s annual general meeting slated for August 30.

In a related development, the company has taken a decision to issue redeemable cumulative non-convertible preference shares of Rs 100 crore. “With reduction of dividend tax from 20 per cent to 10 per cent, the issue of preference shares is becoming attractive to issuer,” sources said.

The company proposes to privately place these redeemable preference shares with corporate bodies, domestic financial institutions, banks and mutual funds.

During 1997-98 and 1998-99, the company had issued redeemable preference shares of Rs 39 crore and Rs 63 crore respectively.

Meanwhile, the company has decided to increase corporate guarantee and letter of comfort limit of an aggregate amount of Rs 60 crore to its 100 per cent subsidiary, BSES Infrastructure Finance Limited (BIFL).

Sources said that the BIFL lends money only to the companies within the Group. The project companies like BSES Andhra Power Limited, BSES Kerala Power Limited, BSES Telecom Limited and other subsidiaries, have approached BIFL for arranging and providing short/long term funds and syndicating lease finance.