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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.
sharmaorajesh
5 months agoAs per their rules vested ESOP have to be exercised within 2 years .
Thus all the stock vested till October 2018 but not exercised will have to exercised by October 2020.
The other rule is that on retirement entire grants which have not been vested will immediately be vested on retirement.
So all ESOP granted after 2018 onwards will also vest in October 2020. These being granted at market prices prevailing during October 2018 to March 2020 MUST presently be mostly underwater.
No investor would exercise options at a price above the present price of ₹1045.
So this explanation does not wash !!
Informed FIIs would not be impressed by such half baked theories.
It’s also very unlikely that ESOPs worth ₹800 Crs will come up for exercise on his retirement. Remuneration for senior executives is governed and cleared by RBI.
H Bank needs to come up with a better explanation about this wholesale exit during a sensitive business quarter.
It looks like jumping ship in troubled waters.
s5rwav
5 months agoThree Private Sector Banks Violated Rules and were Penalized by RBI. Erring Board of Directors of these Companies should Pay the Penalty from their Own Packets. Investors of these Banks cannot be Made to Pay for irregularities Committed by the Board of Directors. I am Babubhai Vaghela from Ahmedabad. Thanks..... https://www.moneylife.in/article/cobrapost-fallout-rbi-penalises-axis-hdfc-icici-banks-for-rule-violations/33102.html
soundararajanmk
6 months agoAllotment of Rs. 160 crores worth of HDFC Bank shares to its MD under ESOP during 2020 is very much on the higher side, while the profits are the result of public money, though through its efficient management. Selling of huge number of shares by the MD of Bank, while relinquishing charge creates a fear in the minds of share holders, customers and FD holders as to the status of the Bank, after he leaves the Bank. He should have issued a statement in this regard clearing doubts that would arise in the minds of public and investors at large, in this regard. Mr. Adithya Puri has failed in his bounden duty to the Bank which he nurtured for so long a period.
cjninan
In Reply to soundararajanmk 5 months agoDear Sir, I totally respect your view. However, if we have invested just because of Mr.Puri, this is fundamentally wrong. HDFC is the second biggest bank and does not depend on one person. There is a team. Hence it does not really matter if Mr.Puri sells or not. On a daily basis, the volume is immense, do we question this. In any case he is retiring, so he needs to take his investments in cash. It is his personal call. He could have informed in a press release - this I agree like Vaidya did when he sold IDFC shares.
ssk.pab
6 months agoAditya Puri is perhaps being regarded as Poster Boy of Banking; but who knows what rules he has tweaked and how many stone walls he has created for his depositors in the process of running his Bank. Much of it later-in a different Forum and on a different Platform......
cjninan
In Reply to ssk.pab 5 months agofully agree. Never liked the bank. I have an account with them which remained in operative because of the negligence of the team. No one bothers. Wonder how this bank became the second biggest bank when their service is so poor.
ssk.pab
In Reply to cjninan 5 months agoYou will know how it grew to be the largest private Bank once you know how they tweak the rules and how they frustrate their depositors every step of the way - all the way.
suketu
6 months agoHDFC Bank wl continue to grow same way without Mr Puri.However the next HDFC Bank is Kotak from stock point of view.
Prasad DN
6 months agoThe question is not, why Mr.Puri sold his ESOP,
now, who is next, can he be the same as Mr.Puri ?????
Or better??
s5rwav
6 months agoHDFC Bank Limited Must Publish Advertisement in Newspapers Inviting Applications for the Successor of Mr Aditya Puri to Avoid Secret Hand Picking of his Successor. I am Babubhai Vaghela from Ahmedabad an Investor of HDFC Bank Limited. Thanks.....