JSW rolls out across-the-board stock options for steel and energy employees

The $13 billion JSW group is rolling out stock options to include the rank and file of JSW Steel and JSW Energy, as a means to reward employees with wealth creation opportunities and ensure that they remain invested in the next phase of growth.

The ESOP (employee stock ownership plan) opportunity is being extended to around 15,000 employees across JSW Steel (13,700) and JSW Energy (1,300) for all grades including workmen, junior, middle, senior management and business leadership.

This is the first such plan in the manufacturing sector where options are being given right from the shop floor worker to the top management, said Dilip Pattanayak (President of HR at JSW Group Corporate).

This is to cover 100 per cent of our employees in JSW Steel and its subsidiaries and also JSW Energy, he added.

At the lower end of the spectrum, JSW will be giving 60 per cent of annualised CTC (cost to the company) equivalent as stock options and at the higher end, 20 per cent.

The ESOP plan will not impact employee compensation in any way and is in addition to the gross CTC, the company clarified.

Commenting on the trend in ESOPS among Indian companies, Aarti Raote, Partner, Deloitte India, said, “While ESOP’s have been used in India for the past three decades, the trends show that these are most prevalent in the IT sector.”

“Manufacturing companies have however been cautious in the implementation of stock awards. Most have extended only traditional stock option plan and that too only to certain levels of higher management,” she added.

In start-ups, however, it was common. “A need to attract talent and a constant cash crunch makes stock options an attractive proposition for start-ups. ESOPs provide a considerable wealth-creation opportunity for employees at the time of liquidity events like IPOs.”

Pattanayak said that the shares will be purchased from the secondary market, so there will be no dilution for existing shareholders.

The exercise price payable by the employee will be face value of the share, i.e. Re 1 per share; the difference between the effective stock price and the exercise price will be paid by JSW.

Employees will have four years to exercise the vested options and the number of shares granted will be determined by their current grade and performance at JSW. In value terms, the ESOP plan is more than Rs 1,000 crore.

The scheme was announced to employees on August 7 to mark the 91st birth anniversary of group founder, O P Jindal.

“Town halls are happening to make them understand the benefits of this wealth creation programme,” said Pattanayak. It is being rolled out from today.

Both JSW Steel and JSW Energy are at the cusp of major growth. For instance, JSW Steel is taking its capacity to 30.5 million tonne from 18 million tonnes at present. The board has already approved a capex plan of Rs 25,115 crore for expansion at Vijaynagar, among other projects.

The combined capacity across associates, joint ventures and overseas operations, which includes Bhushan Power & Steel Ltd, will be 38 million tonnes, making it the top private sector producer of the metal in India.

JSW Energy, too, has set an ambitious target to grow its portfolio to 10 Gw by financial year 2025 and 20 Gw by financial year 2030 from the current 4.6 Gw. The total capex outlay is Rs 75,000 crore over the next decade.

"As an organisation, we are now in the next phase of our growth trajectory," said Pattanayak. "We need to make sure that whatever growth plan we have as an organisation over the next few years everybody is fully invested into that. That is how they will create value not only for the organisation but the upside that will come out of the wealth creation initiative that we have put in place."

The ESOP announcement comes at a time when JSW Steel and JSW Energy stocks have outperformed the broader market by a long shot. In the last one year, returns on JSW Steel stock is 211 per cent and JSW Energy 413 per cent compared to 46 per cent by benchmark Nifty 50 index.

JSW Stock Option

JSW Steel: 13 million shares

• JSWSL OPJ ESOP Plan 2021: 5 million shares to employees of JSW Steel and domestic subsidiaries (to be granted to senior management grade and above) Represents 0.21 per cent of issued equity capital of the company.

• JSWSL OPJ Samruddhi Plan 2021: 8 million shares to employees of JSW Steel and domestic subsidiaries (to be granted to workmen, junior and middle management grade)

• Represents 0.33 per cent of issued equity capital of the company.

JSW Energy: 3.66 million shares

• JSWEL OPJ ESOP Plan 2021: 1.41 million shares to employees of JSW Energy and its domestic subsidiaries (to be granted to middle and senior management grade). Represents 0.09 per cent of issued equity capital of the company.

• JSWEL OPJ Samruddhi Plan 2021: 2.25 million shares to employees of JSW Energy and domestic subsidiaries (to be granted to junior and middle management grade). Represents 0.14 per cent of issued equity capital of the company.