Bandhan Bank looks to retain talent via higher ESOPs

Bandhan Bank has sought shareholders' approval to increase the total number of options under the "Bandhan Bank Employee Stock Option Plan" in order to attract, retain, incentivise and motivate talents.

In its annual report 2018-19, the Kolkata-based micro-credit-institution-turned-full-fledged commercial bank said the plan to incentivise talents through Bandhan Bank Employee Stock Option Series 1 (ESOP Plan Series 1) was approved by the bank's Board and members prior to its initial public offer in 2018. The plan was approved by its Board on July 26, 2017, with an initial stock option reserve of 5,47,57,052 options, and was approved by the members of the bank by way of a special resolution on November 23, 2017.

However, only 22,20,725 options could be granted through special resolutions dated November 23, 2017, and December 20, 2017. Hence, the quantum of options as originally approved for the grant prior to IPO has been exhausted, the bank said in its annual report.

"As such, it is thought expedient to seek approval for grant of 5,25,36,327 additional quantum of options which along with already approved/ granted options, in aggregate, shall not exceed 5,47,57,052 options, with a view to rationalise equity-based compensation in preference over cash-based incentives for the increasing number of talent of the bank, at present and in future. In this background, it is thought expedient to increase the total number of options under the plan as stated above exercisable into an equal number of equity shares of the bank, with all other terms remaining the same under the plan as ratified," according to the annual report.

It said that the Nomination and Remuneration Committee of the board of directors and the board of directors of the bank have approved the aforesaid proposals at their meetings held on May 01-02, 2019, respectively.

The total number of options is subject to fair adjustment upon occurring of any corporate actions namely bonus issue, rights issue, merger, etc., as per provisions of Sebi-Sbeb Regulations.

Subject to final determination by the committee, a permanent employee of the bank, or a whole-time or executive director of the Bank, shall be eligible to participate in the Plan. However, the plan is not eligible for an employee, who is a promoter or belongs to the promoter group; an independent director of the bank; and any such director who either by himself or through his relatives or through anybody corporate, directly or indirectly holds more than 10% of the outstanding equity shares of the bank.

The annual report further said that the options granted shall vest as long as the employee continues to be in the employment of the bank. The committee may, at its discretion, lay down certain performance metrics on the achievement of which the granted options would vest. The options would vest not earlier than one year and not later than four years from the date of grant of options.

A number of private sector banks offer ESOP schemes to its deserving employees, whereas recently few public sector banks have asked their employees to opt for Employee Share Purchase Scheme (ESPS) at a discounted price compared to their prevailing market price.

Bandhan, which started off as a microfinance company by Chandra Shekhar Ghosh, has rewarded its employees in the past, too.

The non-banking financial services company, before it received the banking license, was set up with people who invested their paltry savings and put their trust with Ghosh, the current managing director and CEO of the Bandhan Bank. Ghosh, along with some 30 employees, had put in their savings into the operations of Bandhan in its early days. When he realised more employees were willing to offer the risk capital, he asked them to form a trust, which went on to become the Bandhan Employee Welfare Trust. The pre-IPO options of 22,20,725 were owned by some 3,000 employees, who overnight turned into paper-millionaires when Bandhan Bank listed on the bourses in 2018 at a listing price of Rs 499 per share.

On Tuesday, Bandhan Bank's shares on BSE closed at Rs 560.45 apiece, up 1.35% the previous close.