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Corporate big wigs are wrong about timing of exiting the market


MUMBAI: While retail investors may have missed the bus in the current round of market rally, many senior officials of listed companies who had rushed to sell their Esops have made a killing in the market. During the past month, nearly 800 such transactions were reported in the stock exchange.

HDFC, ITC, HDFC Bank, Kotak Mahindra Bank, Lupin, IndusInd Bank, Axis Bank, ICRA, Mindtree andGlenmark are some of the companies where executives sold their shares, taking advantage of what's been described as a pre-poll rally.
Experts say that employees, who had earlier converted their Esops into shares when share prices were low, are selling them now as prices are at new highs. The Sensex hit a record 22,000 on Monday.
"The trend in exercising stock options has not suddenly gone up, but those who had converted their stock options earlier are selling now to take advantage of the higher prices," said Harshu Ghate, CEO, Esop Direct, an Esop consulting firm.
"In fact, those who had converted Esops into shares earlier, would be the biggest gainers as they had paid perquisite tax on a lower price," he added.
Employees are required to pay perquisite tax on the difference between the fair market value (FMV) on the date of exercising their options. Capital gains have to be paid only if shares are sold within a year.
K Vaidyanath, former director of ITC, sold nearly 3 lakh shares in the last few days, while Nakul Anand, whole-time director of the tobacco company sold 1.3 lakh shares last week. Other top ITC officials who sold shares include SH Rahman, KN Grant, SH Khan and SB Mathur.
Gautam Bhagat, a member of HDFC executive management, sold 50,000 shares of the mortgage company last week, taking advantage of the surge in prices.Similarly, over 40 employees of pharmaceutical companyLupin have sold shares of the company in the past month. Lupin shares hit a record high of Rs 1,003 on March 3 this year. Deepak Gupta, joint managing director of Kotak Mahindra Bank, too, had sold 20,000 shares of the bank recently.
A company awards stock options to its employees based on their performance. Under an Esop, employees have the right to buy shares of the company on a pre-determined date at a pre-determined price.

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