ICICI Bank 2011 Annual Report Download - page 100

F22
7. Preference shares
Certain government securities amounting to ` 2,563.8 million at March 31, 2011 (March 31, 2010: ` 2,405.2 million)
have been earmarked against redemption of preference shares issued by the Bank, which fall due for redemption on
April 20, 2018, as per the original issue terms.
8. Employee Stock Option Scheme (ESOS)
In terms of the ESOS, as amended, the maximum number of options granted to any eligible employee in a financial year
shall not exceed 0.05% of the issued equity shares of the Bank at the time of grant of the options and aggregate of all
such options granted to the eligible employees shall not exceed 5% of the aggregate number of the issued equity shares
of the Bank on the date(s) of the grant of options. Under the stock option scheme, eligible employees are entitled to apply
for equity shares. Options granted for fiscal 2003 and earlier years vest in a graded manner over a three-year period,
with 20%, 30% and 50% of the grants vesting in each year commencing from the end of 12 months from the date of
grant. Options granted for fiscal 2004 to 2008 vest in a graded manner over a four-year period, with 20%, 20%, 30% and
30% of the grants vesting in each year commencing from the end of 12 months from the date of grant. Options granted
in April 2009 vest in a graded manner over a five year period with 20%, 20%, 30% and 30% of grant vesting each year,
commencing from the end of 24 months from the date of grant. Options granted in March 2010 onwards would vest in
a graded manner over a four year period with 20%, 20%, 30% and 30% of grant vesting each year, commencing from
the end of 12 months from the date of grant. The options can be exercised within 10 years from the date of grant or five
years from the date of vesting, whichever is later. As per the scheme, the exercise price of ICICI Bank’s options is the
last closing price on the stock exchange, which recorded highest trading volume preceding the date of grant of options.
Hence, there was no compensation cost based on intrinsic value of options.
In February 2011, the Bank granted 3,035,000 options to eligible employees and whole-time Directors of ICICI Bank and
certain of its subsidiaries at an exercise price of ` 967. Of these options granted, 50% would vest on April 30, 2014 and
the balance 50% would vest on April 30, 2015. Based on intrinsic value of options, compensation cost of ` 2.9 million
was recognised during the year ended March 31, 2011.
If ICICI Bank had used the fair value of options based on binomial tree model, compensation cost in the year ended
March 31, 2011 would have been higher by ` 905.8 million and proforma profit after tax would have been ` 50.60
billion. On a proforma basis, ICICI Bank’s basic and diluted earnings per share would have been ` 44.47 and ` 44.27
respectively. The key assumptions used to estimate the fair value of options granted during the year ended March 31,
2011 are given below.
Risk-free interest rate ................................................................................................................... 5.26% to 8.42%
Expected life ................................................................................................................................ 6.35 to 6.87 years
Expected volatility ....................................................................................................................... 48.38% to 49.82%
Expected dividend yield .............................................................................................................. 1.10% to 1.33%
The weighted average fair value of options granted during the year ended March 31, 2011 is ` 535.87
(March 31, 2010: ` 199.91).
A summary of the status of the Bank’s stock option plan is given below.
` except number of options
Stock options outstanding
Year ended March 31, 2011 Year ended March 31, 2010
Particulars Number of
options
Weighted
Average
Exercise Price
Number of
options
Weighted
Average
Exercise Price
Outstanding at the beginning of the year .......................... 18,763,460 689.50 18,992,504 685.05
Add: Granted during the year ............................................ 5,514,600 972.00 1,731,000 434.78
Less: Lapsed during the year, net of re-issuance .............. 1,005,536 871.95 365,372 661.78
Less: Exercised during the year ........................................ 2,743,137 517.21 1,594,672 366.38
Outstanding at the end of the year .................................... 20,529,387 779.72 18,763,460 689.50
Options exercisable ............................................................ 10,197,137 682.72 10,104,780 609.18
In terms of the Scheme, 20,529,387 options (March 31, 2010: 18,763,460 options) granted to eligible employees were
outstanding at March 31, 2011.
forming part of the Accounts (Contd.)
schedules