ESOP FBT to be recovered from Employees - Infosys

With the enhanced FBT regime coming into effect from April this year, Infosys Technologies Ltd has reached out to its employees to exercise the options.

The Union Budget 2007-08 has brought ESOPs under the Fringe Benefit Tax regime. The Finance Ministry though is yet to spell out the norms to tax the gains arising after exercising ESOPs.

"We have been telling our employees about the change in law and encouraging them to exercise their stock options before March 31," said Mr V. Balakrishnan, Chief Financial Officer, Infosys Technologies Ltd, told Business Line.

This was to help employees contain their tax liabilities. Some banks have already come forward to fund the exercise of the options, Mr Balakrishnan said. The company has a total of 12.5 million ESOPs in Indian shares and about 2.8 million American Depository Shares granted to around 5,000 employees.

"While a majority of the ESOPs have been vested, about 500,000 of them are still outstanding," Mr Balakrishnan said. Infosys, credited with introducing the ESOP culture in India, has had a total of three ESOP Plans.

The first stock plan was introduced in 1994 for all eligible employees. In 1998, the company put in place an ADS-linked stock option plan and the third plan in 1999.

The company discontinued issuing ESOPs in recent years. Citing reasons for discontinuing the ESOP Plan, the company's HR chief Mr T.V. Mohandas Pai had told Business Line in July last year, "Our culture and philosophy has been to give ESOPs to everybody. Now it's not possible because we have 53,000 people and it's not a scalable model."

Under the 1998 ESOP Plan, Infosys granted over 12.12 million options to 1,530 employees since 1999, of which a little over 3.03 million options were exercised, as of March 31, 2006. Some 64 employees forfeited about 95,348 options.

Similarly, under the 1999 Plan, about 18,795 employees were granted some 22 million options since 2000 till March 31, 2006.

Close to 30,000 employees exercised 8.8 million options during the period, while 429 employees forfeited 1.66 lakh options.