The Union government has decided to divest six lakh shares of telecom giant Videsh Sanchar Nigam Ltd (VSNL) in favour of the company's employees.
The `employee shares' would be sold at a steep discount to the current market price of Rs 830 per share. Consequently, all VSNL employees together would stand to gain at least Rs 31.8 crore at the government's expense.
``The exact price at which these shares will be offered to the employees has not been decided yet. But it is likely to be offered at a price between Rs 120 and Rs 300 per share,'' a highly placed VSNL official told Business Standard.
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At the current market price of Rs 830, the 6 lakh shares are valued at Rs 49.8 crore.
If the shares are to be sold to VSNL staff even at Rs 300 per share, the government would virtually be gifting them a whopping sum of more than Rs 30 crore.
It is however, still not clear whether the VSNL employees would be entitled to sell these shares in the open market immediately. Some kind of minimum holding period is likely.
The government currently holds 65 per cent of VSNL's equity base of Rs 95 crore.
After selling 6 lakh shares to employees, its stake in the company would decrease marginally (by 0.63 per cent).
VSNL currently has 300 employees. All of them would be offered 200 shares each under the proposed scheme, irrespective of their grade.
This move is interpreted as an attempt to reward employees in what is likely to be a bumper year for the extremely profitable public sector undertaking (PSU).
Against a sales of Rs 5,194 crore and a net profit of Rs 503 crore during fiscal 1996-97, VSNL reported sales of Rs 3,015 crore and a net profit of Rs 415.3 crore for the first half of 1997-98.
The VSNL board is scheduled to meet this week to take on record the full results for 1997-98.
Asked if there were any plans to issue stock options to employees, the VSNL official replied in the negative.
``We are, however, not averse to considering such schemes in the future,'' he added.
The existing SEBI guidelines on preferential allotment do not allow listed companies to issue shares at a steep discount to the market price.
All such allotments, including stock options, should be marked to the market, based on a SEBI pricing formula.
It is this guideline that may have prompted the government to part with a marginal percentage of its holding instead of issuing fresh equity to VSNL's employees.