MUMBAI: More than 60 employees of the embattled micro lender, SKS Microfinance, have each made more than Rs 1 million selling their shares after listing, making a return 29 times their investment in three years.
Employees working in various capacities -ranging from an assistant manager to a vicepresident - have sold their holdings in at least 130 separate transactions ever since the Hyderabad-based firm listed its shares, data show. So far, the employees have sold 1.96 lakh shares, accounting for nearly a sixth (or 16%) of what they got through an Employee Stock Purchase Scheme (ESPS) in 2007.
Though a comparable macro data on share sale by staff are not available, the number of shares sold immediately after the listing is seen as a high number. The transactions are drawing attention, given the public spat between its founder chairman Vikram Akula and sacked chief executive Suresh Gurumani. That has drawn regulatory attention that threatens to cripple the fledgling industry.
“The number is large, but I will not be too alarmed by it,” says Prithvi Haldea, managing director of Prime Database, a capital market information provider. The high number of transactions is not necessarily an indicator of SKS employees’ trust in the company’s future, he says. “It is the first exit opportunity for employees and human tendency is to monetise the holding instead of keeping it,” says Haldea.
Irrespective of the fact what the employees feel about SKS, they have made huge profits from the sale. They got the shares at an average price of Rs 38 per share and in less than three years time; the same shares were sold at an average price in excess of Rs 1,100 - a cool profit in excess of Rs 1,050.
In the past three weeks of October, post the resignation of chief executive officer, Suresh Gurumani , there are no exchange filings from SKS on share sales by the staff. The stock has also underperformed the benchmark, losing nearly a fifth of its value in the past 20 days. It closed at Rs 1,003.5 per share on the Bombay Stock Exchange (BSE).
SKS has introduced a mix of employee stock options and stock purchase plans since 2007, including one for independent directors. Eligible employees were encouraged to buy their entitlement in the stock purchase scheme, with interest-free loans for a certain time period. Under the first stock option plan, only SKS chairman Vikram Akula was allotted 9.45 lakh shares at a price of Rs 49.77 per share in December last year.
In less than two months, Mr Akula sold these shares to Tree Line Asia Master Fund (Singapore) for $13.67 per share (or Rs 614 assuming an exchange rate of Rs 45 to a dollar), thus making a profit of Rs 564 per share. At the time of filing the offer documents just before the public offer, Mr Akula held option rights for another 2.68 million shares, accounting for little over 4% of pre-issue share capital.