SHAREBASED PAYMENT – A COMPARATIVE STUDY OF EMPLOYEE STOCK OPTIONS SCHEMES AMONG THE TOP 5 IT COMPANIES IN INDIA

Abstract

Employee Stock Ownership Plans (ESOPs) have gained importance as a form of compensation in the Indian information technology sector, especially after the implementation of Ind AS 102 - Share-based Payment. This study aims to conduct a comparative study of ESOP schemes and ESOP utilisation in the top five listed companies in the IT sector in India for 2017-18 to 2024-25. The specific objectives are to investigate the evolution, growth, and characteristics of ESOPs, as well as trends in options that can be exercised, exercised, forfeited, and not exercised as such, and determine whether there are statistically significant differences between companies.

This study is solely based on secondary data collected from annual reports, notes on accounts, ESOP scheme documents, and regulatory filings. Descriptive trend analysis was tested using One-Way ANOVA tests. The results show widespread variations in ESOP design, such as plan type, vesting periods, eligible shares, and pricing method. However, firms in India report fair value accounting based on the Black–Scholes model, in accordance with Ind AS 102. ESOP intensity, that is, the number of schemes and exercisable options, is highest in Tech Mahindra Ltd. and Wipro Ltd. While Infosys Ltd., HCL Technologies Ltd., and LTIMindtree adopted a more conservative approach to ESOPs.

The ANOVA results show significant differences (p < 0.001) in the number of schemes introduced among the companies, as well as in the level of exercisable, exercised, forfeited, and vested but not exercised options. This suggests that ESOP implementation practices are company-specific rather than sector-wide practices. The study reveals that unexercised options dominate exercised and forfeited options and are relatively large in later years, highlighting the potential issues associated with market conditions, taxation, attrition, employee awareness, and other factors. The research finds that while ESOPs are used as retention and alignment tools, their effectiveness is critically dependent on scheme design, communication, and operations, which have significant utility for policymakers, boards, and human resource managers.