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Close on the heels of Infosys Technologies suspending its employee stock option plan, ICICI Bank said the change in accounting policy in treatment of stock options could adversely affect its earnings.
However, the new private bank has no plans to suspend the Esop scheme as it is an important part of its employee compensation package.
Infosys has kept its Esop programme in abeyance on account of lack clarity on the accounting issue in regard to the options.
The International Accounting Standards Board is considering requiring companies to change their accounting policies to account for stock options issued to employees based on the fair value method.
ICICI Bank, like any other Indian company, now deducts the expense of employee stock option grants from its income based on the intrinsic value method and not on the fair value method.
"It is anticipated that Indian accounting standards will follow international accounting standards and also require expensing of stock options based on the fair value method," ICICI Bank said in its Draft Red Herring Prospectus for its forthcoming Rs 3,050 crore (Rs 30.50 billion) public issue submitted to Securities and Exchange Board of India on Wednesday.
"If we change our accounting policy with respect to the treatment of stock options, our earnings could be adversely affected. Had compensation cost for our employee stock options been determined in a manner consistent with the fair value approach, our profit after tax for the nine-month ended December 2003 would have been reduced to Rs 11.55 billion from Rs 11.82 billion," the prospectus said. For fiscal year 2003, the profit would have come down from Rs 12.06 billion to Rs 11.70 billion.
ICICI Bank has been granting stock options to its employees and directors since fiscal 2000. The maximum number of options granted to any single employee is capped at 0.05 per cent of its equity shares at the grant of Esop and aggregate of all options granted is capped at 5 per cent of the equity.
K V Kamath, MD and CEO of the bank, tops the list of executives holding 68,500 shares as on March 3, 2003, under the Esop scheme, while he has been granted a total 525,000 shares under the scheme.
Joint managing director Lalita D Gupte held 31,987 shares, while she has been granted 465,000 shares; deputy managing director held Kalpana Morparia held 21,190 shares, while she has been granted 340,000 shares; executive directors Chandar Kochhar held 35,031 shares (granted 255,000 shares) and Nachiket More held 10,000 shares (granted 252,000 shares).