The Telegraph
Since 1st March, 1999
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Lever stock options lose sheen

Mumbai, June 20: The prospect appears dim for stock options handed out to the best and brightest at Lever.

The options are priced at the going rate of the stock three years ago — the time when they were allotted on paper. The assumption is that the share will be worth more in future.

However, jitters over Lever’s sputtering sales machine have driven down its stock below the price fast-moving executives must fork out to get their options.

The first batch of options is due on or after July 24. The closing price of the Lever share on the day the option was granted was Rs 217.45. On Friday, it ended at Rs 126.80. This represents a decline of 41.68 per cent over three years.

Stock Option 2001 was considered generous then as 24.75 lakh shares worth Rs 53.82 crore were set aside for staff. Rights to options allotted in 2002 and 2003 can be exercised on or after April 23, 2005 and April 24, 2006.

“Unless the share price improves dramatically in the months ahead, it is highly unlikely that employees will exercise the options,” an analyst tracking Lever said.

The company merely said the “strike price” for exercising the option is determined by market price on that date. “These are individual decisions. We have no further comments to make,” an official said in an e-mail response.

Here’s a checklist of just how two Lever top guns are loaded up on options: former chief M. S. Banga has 3.35 lakh shares, while current boss M. K. Sharma has less than a lakh. The bulk of these shares would have been taken next month, but the low price has made this unlikely.

The pricing formula set for the option has fallen from Rs 217.45 in 2001 to Rs 210.35 in 2002 and Rs 136 in 2003.

Lever shares, considered widely as a blue-chip investment not long ago, has been shunned by investors after its top-line growth slackened in recent years. The woes were deepened by a poor monsoon two years back.

In 2003, Banga was given 1.54 lakh shares; Sharma, Gurdeep Singh, D. Sundaram, Arun Adhikari and Satish K. Dhall were each granted 42880. Gunender Kapur and S. Ravindranath took home 53,600 each. These shares will make their way to the owners in 2006.

Though few are keen on their shares now, the number of options granted has been steadily rising every year. The 2001 plan offered 24.75 lakh shares, the 2002 plan 32.33 lakh shares and the 2003 plan 42.76 lakh shares.

The slide in the Lever stock has occurred as the company battles what is arguably one of its toughest battles in its history. Swarms of local and foreign companies have been sniping at its heels. To make the going tougher, the Indian customer has been spending more on phones than fast-moving consumer goods like soap.

“The shift in consumer spending patterns will continue to limit growth in the average selling price of products and will increasingly weigh on the stock price performance,” a recent J. P. Morgan research report said.

The company, however, is known to claw back from difficult situations and a good monsoon, for instance, could turn the tide back in Lever’s favour, say analysts.

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