BPCL to offer employees ESPS with 1-year lock-in period. What does it mean?

• A source who spoke to PSU Watch on the condition of anonymity said that there will be a lock-in period of one year for shares offered to employees under the ESPS

• The company is going to offer shares to employees at one-third of the market price of BPCL scrip in the preceding six months

New Delhi: In the run-up to its privatisation, state-run Bharat Petroleum Corporation Limited (BPCL) is set to offer its employees a stock purchase scheme, which has received a nod from the company's Board of Directors on September 4, BPCL said in a regulatory filing. "… this is to inform you that the Board of Directors at the meeting held on 4.9.2020 has approved the proposed Employee Stock Purchase Scheme (ESPS) to the specified employees through the trust mechanism, subject to the approval of the shareholders," said the regulatory filing.

What is ESPS?

The Section 2(37) of the Companies Act, 2013 defines "employees stock option" as "the option given to the directors, officers or employees of the company or of its holding company or subsidiary company or companies, if any, which gives such directors, officers or employees, the benefit or right to purchase, or to subscribe for, the shares of the company at a future date at a pre-determined price." The stock purchase scheme is basically a tool for companies to retain its employees and reward them for their association with the company. However, they often come with a 'lock-in' period, which is the period for which the employee cannot sell the shares after allotment.

BPCL ESPS will have 1-year lock-in period for employees: Sources

A source who spoke to PSU Watch on the condition of anonymity said that there will be a lock-in period of one year for shares offered to employees under the ESPS. In the regulatory filing to the stock exchanges, BPCL said, "The Trust formed for the purpose shall purchase the aforesaid shares from the 'BPCL Trust for Investment in Shares' by way of secondary acquisition through the stock exchanges as per the SEBI (Share Based Employee Benefits) Regulations, 2014 and other applicable laws." 

Also read: Cooking gas subsidy will continue post BPCL privatisation: Centre

Sources said that the BPCL Trust for Investment in Shares holds around 9.33 percent of BPCL's paid-up share capital. Out of this, the company is going to offer 2 percent to employees at one-third of the market price of BPCL scrip in the preceding six months. The proposal is expected to get an approval from BPCL shareholders at the upcoming annual general meeting (AGM) on September 28. The ESPS offer will be made to employees only after the grant of an approval.

The ESPS will not have any bearing on the government's shareholding in BPCL.

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