HLL staff cream rising share

MUMBAI: The Hindustan Lever (HLL) share is back in favour — in more ways than one — as the company returns to double-digit sales and profit growth.

Half-a-decade after employee stock options were devised by the board of the company, there has been a sudden harvest of stock options by staff (Esops).

It’s a sign of the times.

The Esops have become attractive as the HLL share price is among the major outperformers in the stock market today.

In the run-up from 10,000 to 11,000, the HLL share added almost 29%, the biggest gainer among the 30 stocks representing the Sensex.

On Monday, the scrip rose Rs 13.2 or 5.2% to Rs 268.55, its biggest gain since February 14, as investment bank UBS re-rated it on Monday.

In late February, the HLL board constituted a committee to create, issue and allot HLL shares under “2001 stock option plan”.

The committee met for the first time on March 16, followed by another meeting on March 27 to deliberate on the requests for stock options.

The March 27 meeting saw the committee allotting 1.17 lakh equity shares of Re 1 each under Esop and before that its meeting held on March 16, saw the committee allotting 40,115 equity shares of Re 1 each under Esop.

Esops were not as hot earlier simply because the exercise price was higher than the stock market price of HLL shares.

HLL then was in the midst of a major overhaul as the top management undertook a series of restructuring steps to bring the company back on track, hiving off businesses which were not in line with its core business.

This included the fertilisers business owned through an associate company, the fragrances business, and certain products such as Dalda, Nihar hair oil.

It was during this period that HLL was challenged by Procter & Gamble with a painful price war which took the sheen out of the share price, often considered as a defensive stock. Things have improved dramatically.

The HLL top brass till last year preferred to buy shares from the stock markets, informing the stock exchanges appropriately even as they preferred to postpone exercising their stock options, which were priced above the market price and therefore not attractive enough for them to exercise the options that were vested some years back.

The HLL stock option pricing formula is priced as on the date of option grant. Thus the stock option 2001, dated July 24, was priced at Rs 217.45, and was vested after three years from date of grant.

The 2002 option, priced at Rs 210.35 was vested three after April 23, 2002, but the annual report for 2004, revealed that none of the officials had exercised stock options. The annual report for 2005 is not yet released, as HLL follows the December ending as its foreign parent.