Finanical services firms' employees look to cash in on bull market

Employees convert ESOPs in financial services firms with broking arms, promoter stake sees dilution even as revenues, profits surge

Financial services companies with broking arms have seen a decline in promoter stakeholding. Dilution of existing stake through fresh issue of shares, mostly to employees, has resulted in the decrease over the last quarter, according to company officials.

Promoter holding data for Motilal, Geojit, Edelweiss show lower stake in the December quarter, according to exchange data.

In Edelweiss, the promoter holding is down to 36.28% from 36.74% earlier. Geojit is down from 64.07% to 63.72%. Motilal Oswal's promoter holding is down from 73.76% to 73.42%. JM Financial too showed a decline in promoter stake from 68.19% to 66.1%.

Company officials said that employees had subscribed to fresh issue of shares under their respective benefit schemes. Such Employee Stock Option Schemes (ESOPs) had resulted in dilution of stake. The promoters themselves had not sold stake, said spokespersons for Motilal, Geojit and JM.

Motilal Oswal Financial Services' broking and related revenues were up 61% over the same quarter last year, coming in at Rs.118.11 crore, according to a statement. They were down marginally (1%) over the previous quarter, partly on account of fewer trading days in the three month period ending in December. Overall, its total income came in at Rs.185.6 crore, up 60.18% over the same quarter last year. Profits rose from Rs.3.55 crore to Rs.35.91 crore.

For Geojit BNP Paribas Financial Services, total income was up 33.14% to Rs.70.63 crore. Profits rose 5% to Rs.16.55 crore.

Edelweiss Financial Services had an increase of 49.84% over the same quarter last year, with total income for December 2014 coming in at Rs.959.18 crore. Profits were up 43.36%, coming in at Rs.82.86 crore.

JM Financial's revenue rose 65.3% over the same quarter last year, to Rs.365.84 crore. Its profit was up 97.06% to Rs.87.02 crore in the same period.

" We have not diluted any stake. The marginal reduction is due to ESOPs being exercised. Further, we don't have any plans to dilute our stake. On the contrary, given a viable legal option, we would like to increase it," said a Motilal Oswal spokesperson in an emailed response.

"The decrease of promoters stake in terms of percentage is due to allotment of shares under ESOP schemes to its employees during last three quarters," said a Geojit spokesperson.

A JM Financial spokesperson too said that the dilution was also on account of employees stock options. There had also been conversion of warrants, the person added. Edelweiss corporate announcements too showed instances of ESOPs being exercised.

Satish Menon, executive Director of Geojit BNP Paribas said that ESOP action in general tends to pick up for listed firms in a bull market.

"During a bear phase, the market price is often less than the price of ESOP conversion and so they lapse. When stock prices run up, employees of listed firms see an opportunity to convert and make profits," he said.