ESOP - Long term Incentive

Presented By
Team - Elite

Kuntesh
Chintan
Sandip
Jaymin
Jay
[082129
[082136
[082120
[082130
[082158
]
Introduction
 Employee Stock Ownership Plan
 Providing employees the ownership of stocks
 A Profit Sharing Plan

 ‘Stock option’ - right or privilege to buy stock

under an offer continuing for a stated period
of time at a certain price.
The Objective
 Aimed to create “wealth”
 Attract & Retain talent
 A thank-you for past loyalty and performance
 Promote employee ownership culture
 Incentive to drive future value
 Industry practice (sometimes)
ESOP in India

ESOP Used India for

Top Management
Employee Retention Compensation
Commitment
SEBI Guidelines
 Redefine market price as the latest available
closing price prior to the date on which
auctions are granted
 Consider the exchange on which there is

highest trading volume

 Appoint a registered merchant, banker for

implementation
 Accounts of the company are prepared as if

company is administrating ESOP

ESOP Types
 ESOS – Granting employee the option to acquire
the shares of the company at a predetermine
price
 ESPS – Shares are directly allocated at the time of

a public issue (may be at a discounted price)

 SARS – Shares are allotted and employee is free

to exercise his option after vesting period. He

can sell them after locking period.(Cashless
transaction for employee)
 Sweat Equity – Shares issued for a consideration

other than cash

Advantages
 Capital Appreciation
 Incentive Based Retirement
 Tax Advantages
 Company reduces it's tax liability
Disadvantages
 Dilution
 Fiduciary Liability
 Liquidity
 Stock Performance
Implementing ESOP
 Conceptualizing Scheme
◦ Valuation of firm’s stock by appraiser
◦ Analyze effect on existing stockholder
◦ Prepare Plan for “Repurchase obligation”
 Financial Modeling
 Employees Interaction
 Drafting of Legal Documents
Thank You For Time