Stock Optionaires

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Take a look at the four gentlemen profiled on these pages. On the face of it, there’s nothing out of the ordinary in these typical, tenured career and financial profiles. Most will spend their entire working careers in the same company. But all of them are stakeholders now, and speak with pride about their involvement in their companies.

Some of it may be hype, but then employees of public sector units have always been far removed from the spotlight, faceless entities in large corporations.

In the post-liberalisation era, public sector jobs have lost much of their aura. Sure, there’s perceived job stability in working for an arm of the state. But market participation is the ultimate reward—and test of faith. And the sooner the PSU workforces get used to the market realities, the better.

Apart from making them richer, it also opens the door to disinvestment a bit wider. Only if PSU employees participate in the gains from growth, can the classic opposition to disinvestment—from labour unions—be quelled.

The participation of employees is key to the UPA government’s plan to use a buoyant stock market to divest part of its stake in profitable public sector firms. While the appetite for PSU paper is huge, it is only fair that employees be willing and significant participants in the gain game.

And this is also unlocking the equity culture, opening it out to a larger amount of people. Many public sector employees have never invested in the stock market. In many cases, they have gone ahead to build substantial portfolios after making their first investment in the company they work for. This helps the market grow. And, hopefully, make a lot of the public in the public sector a whole lot richer.

Sunit Arora

‘The government got Rs 10,000 cr, I got what I wanted’

C Venkata Subramanian
Deputy manager (finance), ONGC

HE makes no bones about it. This investment is driven by emotion. And backed by the promise of returns.For 47-year-old C Venkata Subramanian, the decision to pick up 300 shares of the Oil & Natural Gas Corporation during the public offer in March this year was born in a sense of attachment to the company. Having worked in ONGC for over 20 years, the Delhi-based deputy manager (finance) had already voted with his wallet for his company once before, by picking up 562 shares during the oil giant’s initial public offering (IPO) in 1994.

‘‘In the case of ONGC, I do not go by loss or gain. I feel it’s my company and I should contribute in every possible way. It is an attachment which I cannot describe but can only feel,’’ says a visibly emotional Subramanian. ‘‘The government got over Rs 10,000 crore and I got what I wanted,’’ he adds with a flourish.

	ONGC
	Face value: Rs 10 Public offer closed on: March 13, 2004 Funds mobilised: Rs 10,534 crore Offer price: Rs 750 Current price: Rs 818 Employees’ market-cap: Rs 1,166 crore Gain in employees’ market-cap: Rs 97 crore No of employees: 40,000 IPO offer size: 14.26 crore shares Employee quota: 10%

Of course, it’s good for morale—and productivity. Subramanian feels employee participation has changed the mindset across the board, and created a ‘‘sense of pride within us for holding ONGC shares’’. He drives home the point: ‘‘How else can you explain the fact that almost all the 38,000 employees picked up shares during the public offer?’’

While quick to agree that disinvestment via public offers was a good route and worthy of emulation in other public sector firms, Subramanian adds a caveat: It should be restricted to the profit-making PSUs.

There’s hard logic behind that statement. Subramanian is well-entrenched in the equity market, with shares of Reliance, TCS, HLL and MRPL in his kitty. But it’s not only a sense of pride that is driving his investments in ONGC.

‘‘I will pick up ONGC shares from the secondary market when the prices fall. Right now, the shares are not going up as expected but I’m quite sure that with the future plans of OVL and ONGC, shares will rebound. I will pick up shares when the prices fall so that in future I have a huge gain,’’ says a confident Subramanian.

Then, of course, there are the high dividends on offer, which Subramanian feels will go a long way to retiring some outstanding debts. Unlike some of his colleagues who have sold off ONGC shares to pay for their housing loans, Subramanian wants to hold on to his PSU shares.

‘‘The company gives me good dividends to take care of my economics. Plus, I do not want to sacrifice the feeling of being a proud owner of one of the biggest oil firms,’’ he says.

Subramanian is a cautious investor. The bulk of his investments is in government bonds.

‘‘When I have surplus funds, I invest in the equity market and real estate,’’ he says. But in this case, the ONGC shares are clearly seen as a family asset—they will be passed on to his only daughter after she gets married.

Santanu Ghosh

‘These shares are my assets, emotional rather than economic’

Kumar Shanker
Manager (chemicals), GAIL

WHEN 34-year-old Kumar Shanker of Madurai joined GAIL in July 1993, investing in equity was the last thing on in his mind. The engineer from BITS, Pilani, launched his investment portfolio with fixed deposits. As he climbed the corporate ladder—after working on various sites, including LPG plants, he moved to the corporate office in Delhi—the young engineer ventured into mutual funds.

But equity was nowhere in the picture.

And then it happened. The government’s decision to dilute 10 per cent equity in GAIL earlier this year via the public offer route (and the subsequent allotment to the employees) opened Shanker’s eyes to the ‘‘undiscovered world of shares’’.

Shanker picked up 270 GAIL shares, more for ‘‘emotional reasons rather than economic considerations’’. This was only his second foray into the share market.

‘‘I picked up 200 GAIL shares during the IPO in 1996-97, but that was different. All employees were given shares when GAIL was listed,’’ he says. ‘‘The second round spurred me on to equity investments. On my own initiative, after discussing it with my wife, I applied for 270 shares and got them.’’

Now, Shanker is an active player in the equity market with shares of Infosys, HLL, BPCL and HPCL in his portfolio. Unlike many dabblers in Dalal Street, Shanker goes by his own instincts and discretion in the market.

	GAIL
	Face value: Rs 10 Public offer closed on: March 5, 2004 Fund mobilised: Rs 1,650 cr Offer price: Rs 195 Current price: Rs 206 Employees’ market-cap: Rs 87 crore Gain in employees’ market-cap: Rs 4.64 crore No. of employees: 3,370 IPO offer size: 8.45 crore Employees’ quota: 5%

‘‘When it comes to other sectors, I stick to the blue chip firms. In the oil and gas sector, I use my own judgement since I know the sector well,’’ says Shanker.

Apart from opening up the concept of equity, Shanker says he gets a sense of pride and belonging to the company by possessing these shares. ‘‘Picking up GAIL shares in the public offer made a difference not just to me, but to all my colleagues who subscribed to it. It makes one feel an intrinsic part of the organisation and gives one a better sense of belonging to the company,’’ says Shanker.

When asked about this method of keeping employees happy, Shanker is clear that it should be followed in other public sector companies. ‘‘It is beneficial to one and all, and for us (employees) it is more than a gesture.’’

Though there have been ups and downs in the GAIL share price, Shanker has held on. ‘‘At present, if I sell there will be a gain,’’ Shanker says. ‘‘But my GAIL investments are for the long term. Oil companies, including GAIL, offer good dividends and I am not looking at these investments for short-term gains.

‘‘The GAIL shares are my assets. Maybe in the distant future, if I need cash, I will be happy to use my assets, but not now,’’ avers Shanker. The young manager in GAIL does not have any spare money to invest in equity at present but when he does, GAIL and the oil firms will be his top priority.

Santanu Ghosh

The NTPC experience

MANY of the 23,000 employees of the National Thermal Power Corporation (NTPC) are reaping—notionally, at least—the benefits of gains in the stock market. Employees who applied for shares in NTPC’s recent initial public offering have already seen a significant appreciation in their investment after the company listed on the stock exchanges on November 5.

Employees got shares at a rate of Rs 62 per share. Now, this has appreciated to the Rs 75 level on the stock exchanges, a gain of 21 per cent in less than two weeks.

	NTPC
	Face value: Rs 10 IPO closed on: October 14, 2004 Money raised: Rs 5,420 crore Offer price: Rs 62 Current price: Rs 75 Employees’ market-cap: Rs 155 crore Gain in employees’ market-cap: Rs 27 crore IPO size: 86.53 crore shares Employees’ share quota: 2.061 crore No of employees: 23,000

In other words, an employee who invested Rs 6,200 in 100 NTPC shares has pocketed a gain of Rs 1,300. In fact, the employees’ quota was oversubscribed 3.1 times, indicating the enthusiasm among employees to participate in the divestment process and become shareholders of the company they worked in. It is an emotion that crops up unfailingly among employees of PSUs–and could be a resource tapped again and again.

Citing a quiet period post the IPO, NTPC did not agree to its employees being interviewed by The Sunday Express. It is safe to guess, however, that their stories would be very similar to those of the gentlemen featured alongside a few months down the line. Either way, the success of India’s second-largest IPO—and the role of employees as part of that success—is the best example of how the government can use a bullish stock market to get a good response from retail investors, including employees.

‘I’m part of a bigger, better future’

V K Gupta
Chief manager, Bank of Maharashtra, Pune

	BANK OF MAHARASHTRA
	Face value: Rs 10 IPO closed on: March 4, 2004 Fund mobilised: Rs 230 crore Offer price: Rs 23 Current price: Rs 24.30 Employees’ market-cap: Rs 24.30 crore Gain in employees’ market-cap: Rs 1.30 crore No of employees: 13,500 IPO offer size: 10 crore shares Employees’ quota: 10%

FOR a man whose job it is to monitor the books, this equation balances perfectly. V K Gupta has 100 shares for each of the 25 years he has put in at the Bank of Maharashtra (BoM). Today, the 48-year-old chief manager is a proud ‘‘part-owner’’ of the government-owned bank.

When the bank came out with an IPO earlier this year, Gupta didn’t think twice. The chief manager (credit monitoring) at the Pune-based BoM bought the shares as he feels the banking sector can only grow in the coming years. ‘‘I feel so happy when I see my share certificates, they make me feel that I am part of a bigger, better future,’’ says a smiling Gupta.

Though he is not much of a player in the shares and equity market, Gupta says this deal is quite different. ‘‘These are shares of my own bank, I know the people who are working here with me and I know how well we can do in the future.’’

Unlike the State Bank of India or Bank of Baroda, Bank of Maharashtra—with deposits of Rs 22,175 crore and net profits of Rs 222 crore—is one of the later entrants into the capital market.

Though the share has not appreciated much after listing, market analysts say it’s only a matter of time. Long-term investors in other public sector banks listed earlier have seen their holdings appreciate significantly. And that’s why Gupta is so gung-ho on this model of empowerment—and disinvestment.

There cannot be a better way of disinvesting shares than by offering them to retail investors and employees, says Gupta. His logic: Divesting shares in any government concern only gives its employees and the public in general an opportunity to be more responsible. ‘‘Look, I know today that if I work harder and my bank’s performance improves, it’s my gain at the end of the day.’’

As for the future, this father of two teenaged daughters feels the shares could help increase financial security. At one with most middle-class families, Gupta says his biggest concerns are the education and the marriage of his daughters. The shares would definitely help, says he.

All said and done, Gupta is a loyal employee, set to be a lifer at BoM. But even so, he seems to realise the worth of equity. In particular, his share of that equity. ‘‘It’s all in my hands; if I work hard, my bank will do well and the share price will go up, thus adding to capital gain for me… so you see, it’s almost like I control my own future.’’

While Gupta says he will ‘‘nurture my second home with my own sweat,’’ he’s also pragmatic. How long does he intend to hold on to the shares? ‘‘As long as I can… I am a very long-term player. I will not part with the shares till my retirement,’’ he says proudly.

The equity culture has got one new convert.

Arundhati Bakshi-Dighe

‘The accountability gets spread out’

P Vittal
Deputy manager (finance), Dredging Corporation of India

P VITTAL is as conservative as they get, if one analyses how he spends the day. Work schedule: 10 am to 6 pm. Loves to read: financial reports. Loves to listen to: religious melodies. Loves to watch: prime-time news.

It’s hardly surprising then that this 54-year-old deputy manager (finance) at Dredging Corporation has a conservative approach to investments. In other words, he loves to invest in initial public offerings (IPOs)—and nowhere else. ‘‘I have always hunted for IPOs and subscribed for minimum investment, as the open market is too risky,’’ says the Mumbai-based Vittal, who’s anxiously waiting for a transfer and a promotion.

When the government decided to divest in DCI earlier this year, he immediately applied for shares. And even though there was no quota for employees, Vittal went by plain logic. ‘‘I wanted 15 shares, but finally got allotted only two. I got them for Rs 385, a little less than Rs 400, which was the floating market price,’’ says Vittal.

	DREDGING CORP
	Face value: Rs 10 IPO closed on: March 4, 2004 Funds mobilised: Rs 221 crore Offer price: Rs 400 Current price: Rs 410 Employees market-cap: NA * Employees’ quota: nil IPO offer size : 56 lakh shares No. of employees: 911 * As there was no employee quota, the 1,000-odd workers were told to independently apply for shares

Vittal clearly feels more public companies should go ahead and offer their shares to their employees, albeit with a discount. His logic is simple: ‘‘The model needs to be appreciated as it is a modern version of employee participation in management. It is futuristic in the sense that both the domains come together in the growth of a company. The accountability gets spread.’’

And how does it impact performance? ‘‘I feel great having got the shares. At the end of the day, the equation is simple: you reap what you sow. My work efforts are going to reflect in the market valuation of the company,’’ offers Vittal with a typically Andhraite drawl.

In fact, he has been trying to convince his colleagues to buy the company’s shares. So far, he has managed one conversion, and hopes more will follow. ‘‘I am a chartered accountant by education, so naturally I have researched the subject of my recommendations. Dredging Corporation is a safe bet, or else you wouldn’t find me there. Further, there is the pride element for all us employees.’’

Indeed, Vittal says his investments (worth around Rs 4 lakh) have only one thing in common—the companies are all ‘‘performance-oriented’’. At present, his investment bag includes Reliance, TCS, NTPC, and Syndicate Bank. But he’s the most proud of the two shares he holds in Dredging Corporation.

But there’s also a hard-nosed side to all the loyalty. ‘‘The day I realise my shares are not appreciating, I will drop them.’’ But for now, he has his faith locked in DCI. ‘‘The dividends will be the result of our efforts.’’

For a man with a gross monthly salary of Rs 26,000, Vittal has his priorities all sorted out. As Mumbai’s lifestyle is too ‘‘mechanical’’ for his liking, he wants out of the city. And the day he retires, Vittal will join a CA firm. ‘‘I have always been a workaholic. My shares give me a sense of security.’’ Add Dredging Corp to the list.

Smita Nair