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Updated on 4 August 2020 at 7.10pm to include details of Mr Puri stake sale from a conference all with analysts...
Last week, Aditya Puri, managing director (MD) and chief executive of HDFC Bank sold nearly 95% of his stake valued at Rs842.7 crore. Nothing new in this. In fact, several times, top executives of banks have sold stocks granted to them through the employee stock option plans (ESOP). However, according to market buzz, Mr Puri may have sold the stake to fund ESOPs in HDFC Bank. According to market sources, his ESOPs will amount to several times the size of his stake sale.
Mr Puri held 0.14% stake or about 7.8 million shares in HDFC Bank. Out of this, he sold 7.42 million shares through open market between 21st and 23 July 2020. Through the stake sale he has apparently raised more than Rs840 crore as per market reports.
Mr Puri has been MD of HDFC Bank since September 1994, which makes him the longest-serving MD at a private bank in India.
In FY2020, Mr Puri was granted 6,81,600 shares under ESOP. During the same period, he also sold shares worth Rs200 crore in the bank's subsidiary HDB Financial Services.
As per the annual report of HDFC Bank for FY2020, Mr Puri exercised stock options worth Rs161.56 crore. Besides this, he received an annual salary of Rs18.92 crore during the fiscal year.
Regulatory filing by HDFC Bank shows that between October 2015 and July 2020, Mr Puri had exercised about 3.42 million stock options at an acquisition cost of Rs158. Including his last week stock sale, Mr Puri during this period has sold around 9.65 million shares for about Rs1,165 crore.
Mr Puri is set to retire from HDFC Bank in October this year and the lender is searching for his successor.
As per details of ESOP scheme shared by HDFC Bank with the US SEC, "In case the employee, including a director to whom the options are granted retires, or vacates his/ her office upon reaching the age of supper annuation as per the bank's rules or upon expiry of any extension thereof or on account of any directives, statutory provisions, clarifications or guidelines of the RBI, then in such case all granted options shall forthwith vest in such employee. However, the employee shall exercise the options within a period of six months from the date of such retirement / vacating of the office, failing which the said options shall lapse."
"On exercise of the options the employee shall forthwith pay to the bank the price which includes the grant price plus the fringe benefit tax (FBT) amount or any other amount which the bank has an option to recover from its past and present employees. The bank shall be entitled to recover the price by debiting the salary, saving, other account of the employees with the bank. The employee shall issue necessary authorisations to the bank in this regard," HDFC Bank says in its regulatory filing.
Information shared by HDFC Bank shows that during FY2020, many employees exercised their ESOPs at a price ranging from Rs340 to Rs1,229 per share. Maximum number of shares at 8.17 crore were exercised at an average price of Rs1,139.82.