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A presentation on Advisory and Execution service, in proposal format.
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Sarthi Capital Advisors Private LimitedBridging the Gaps
ESOP Advisory & Execution
Sarthi Capital Advisors Pvt. Ltd. - A Sarthi Group Company1
Privileged & Confidential
ESOP Advisory & Execution
Employee Stock Based
Compensation Plan
Employee Stock Option Plan (ESOP)
Basic Plan
Employee Share Purchase Scheme
(ESPS)
Stock Based Compensation Plans
Basic ESOP – Broad Framework
Sarthi Capital Advisors Pvt. Ltd. - A Sarthi Group Company2
Basic Plan
Restricted Stock units
Phantom Stock
Stock Appreciation
Rights
� A Right, Choice, but not an Obligation
� Each option converts into one or more Equity Shares
� To buy the shares of the Company at a future date
� At a price fixed today- the excise price
� Excise Price remains fixed even if the market price /
benchmark value goes up in future
� Employee would pay only if the market price / benchmark
value is attractive- no investment upfront
Basic ESOP – Broad Framework
Market / Value
Enhancement
To attract, reward,
motivate, and retain
Promote Employee ownership
Improve financial
performance of the Industry
Why ESOP – The Rationale
Sarthi Capital Advisors Pvt. Ltd. - A Sarthi Group Company3
Value Enhancement pays, not the
company from its cash kitty
motivate, and retain
employees especially at start up and growth stage
Employee ownership culture and
reduce attrition rate
performance of the
company, ultimately
contributing to the success
Industry Trends
GRANT (Receives the right)
VESTING (Earns the right)
EXERCISE (Exercise the right)
SALE (Sells the share)
ESOP Illustration
ESOP Life Cycle and Wealth Creation
Sarthi Capital Advisors Pvt. Ltd. - A Sarthi Group Company4
Particulars Year-0 Year-1 Year-2 Year-3 Year-4 Total
FMV 100 150 225 300 400
Less: Excise Price 100 100 100 100
Benefit per Option 50 125 200 300
Total Benefit in the year 12,500 31,250 50,000 75,000 168,750
ESOP Illustration
� 1000 options are granted at time-0, and the price prevailing at time -0 is Rs. 100.
� ESOP’s are vested in the Year 1-4 equally (i.e. 25% each year)
Legal and Regulatory Framework
SEBI (Employees Stock option Scheme & Employee Stock Purchase Scheme) Guidelines, 1999
Depositories Law
Companies Act, 1956
Sarthi Capital Advisors Pvt. Ltd. - A Sarthi Group Company5
Accounting Standards / Norms
Foreign Exchange Management Act (FEMA), 1999 & Regulations issued there under
Income Tax Act, 1956
Department of Public Enterprises (DPE) Guidelines (Additional guidelines for PSU’s)
Methods of ESOP
Creation of Trust
Creation of trust by appointing a trustee to hold the shares/ options in
trust for employees who can subscribe to the shares reserved at a
later date and at a pre-determined price
Directly to Employees
Formulate a scheme of ESOP wherein an option can be reserved in favor of employees to subscribe to the shares of the company at
Sarthi Capital Advisors Pvt. Ltd. - A Sarthi Group Company6
to subscribe to the shares of the company at a future date and at a pre-determined price
ESOP Scheme – Most important document in ESOP, a binding
contract between the company and employees
Quantum
-Attractive enough to create “Wealth”
-Coverage of levels of Employees
Vesting Period
-Time based or Performance based
-Standardized/ Employee to employee
Policy
-Time Tenure, (e.g. quarterly, yearly)
-Eligibility for new and old employees
Liquidity Options Pricing
-Market Value
Impact of Corporate Actions
Contours of a typical ESOP Scheme
Sarthi Capital Advisors Pvt. Ltd. - A Sarthi Group Company7
-How the employee can convert the shares so allotted into cash
-Market Value
-Discount- less dilution
Actions
-Bonus/ Rights/ Splits, etc
Coverage
-Broad based or selective/ Subsidiary
Exercise
-Periodicity
-Pricing
-Issue / Allotment
We can help you
� What are the objectives of the plan? (e.g. Employee ownership, performance
incentive, retention?)
� How to manage dilution? (time-based or performance based or both, standard or
answer plan design questions
Sarthi Capital Advisors Pvt. Ltd. - A Sarthi Group Company8
differentiated)
� What is the optimal pricing strategy to balance expense and reward?
� What are the legal and regulatory implications and requirements of your plan?
� How will changes in the components of the plan impact its performance and impact
(sensitivity analysis)?
� How to manage employee communication and training to ensure the benefit is well
understood?
� How to ensure that this benefit is best used by your employees to build wealth?
� How to manage employee transactions – including regulatory filings for insiders?
answer implementation, and
administrative questions…
We can help you
Sarthi Capital Advisors Pvt. Ltd. - A Sarthi Group Company9
� How to manage employee transactions – including regulatory filings for insiders?
� What financing and reinvestment choices can you offer your employees?
� How to integrate ESOP and employee information across HR and accounting
systems?
� How to manage the compliance and management reporting?
� “Introduction to ESOPs”, trainings done before launch of your plan - and ongoing, as
required.
� Seminars on investing basics, financial planning and tax planning also offered
education and training for your
employees
We can help you
Sarthi Capital Advisors Pvt. Ltd. - A Sarthi Group Company10
� Seminars on investing basics, financial planning and tax planning also offered
� One-to-one special sessions for executives
� Help with launch communications for existing employees (e.g., intranet, e-mail)
� Help with ongoing communications for newly-hired employees receiving grants
Plan design, implementation and management
Formulation of ESOP Scheme
Advisory on the mode of ESOP’s
Obtaining the Merchant Bankers and other mandated certificates
Advisory on the tax and accounting treatment
Sarthi’s ESOP Advisory Services- End to end
support
Sarthi Capital Advisors Pvt. Ltd. - A Sarthi Group Company11
Advisory on the tax and accounting treatment
Obtaining regulatory approvals
Advisory with regard to treatment of ESOP’s at the time of IPO
Fair Valuation of Shares
Employee transaction support and financing
Financial planning and advice; Specialized service to meet employee's needs
HAPPY TO HELP….
SARTHI CAPITAL ADVISORS PRIVATE LIMITED
Bridging the Gap
Sarthi Capital Advisors Pvt. Ltd. - A Sarthi Group Company12
Corporate Headquarters:Mumbai159/11, Amar Brass Compound, Vidhya Nagari Marg,
Kalina, Santacruz(E), Mumbai-400098
Landline: (022) 26528671-72, Fax: (022) 26528673
Regional Office:New Delhi610, Deepali Building,
6th Floor, Nehru Place, New Delhi-110019
Landline: (011) 26419815-16, Fax: (011) 26419818
Disclaimer
All data and information is provided for informational purposes only and is not intended for any factual use. It should not be
considered as an offer of sale of services mentioned herein. Neither Sarthi Advisors nor any of its group company, directors, or
employs shall be liable for any of the data or content provided for any actions taken in reliance thereon.