ESOP valuation Services

Corporate and Regulatory Services

ESOP Valuation Services

An ESOP valuation, factors of such nature to be considered As optional Services to several companies in India. ESOP is being increasingly used as a compensation tool by many Indian and Multinational companies. The compelling reasons for companies to implement ESOPs include wealth creators for its employees and retention. It also provides a measure of employee ownership in a high growth environment. Employee Stock Option Plan, including Conceptualization, Structuring, Documentation, Legal and Regulatory Compliance and Reporting. The objective of ESOP is to motivate to perform better and improve shareholders value.

 

ESOP Valuation Consultants

 

An ESOP Valuation Consultant has to be agile enough to consider various factors even before applying mathematical models like Black and Scholars model. The leading assumptions to be considered for mathematical models as provided in International valuation standards and International financial reporting standards as well as Ind AS are:

  • Current share price
  • Expected volatility
  • Expected dividends
  • Market transferability
  • Term of vesting period
  • Behavioural aspects

 

Other factors to be considered are

  • Merger, demerger and venture capital possibilities
  • Start-up specialties
  • Competition
  • Industry growth rate
  • Non-vesting conditions
  • Performance, grade, seniority like conditions
  • Normal compensation package (other than ESOPs and the ratio of the two)
  • Ring fencing talent during loss years, etc.

 

ESOP valuation for unlisted companies

 

In India the unlisted company cannot issue sweat equity shares (shares under ESOP) for more than 15% of total paid up equity share capital in a year or shares of the value of 5 crores of rupees, whichever is higher except with the prior approval of the Central Government. Sweat equity shares issued to employees or directors shall be locked in for a period of three years from the date of allotment. The price of sweat equity shares (shares under ESOP or such Plans) to be issued to employees and directors shall be at a fair price calculated by an independent valuer.

 

Where an unlisted company proposes to issue sweat equity shares (shares under ESOP or such Plans) for consideration other than cash, it shall comply with following:

(a) The valuation of IPR or of the know-how provided or other value addition to consideration shall be carried out by a valuer;

(b) valuer shall consult such experts, as he may deem fit, having regard to the nature of the industry and the nature of the property or the value addition;

(c) valuer shall submit a valuation report to the company giving justification for the valuation.

 

 

ESOP consultants in india

 

  1. ESOP Consultants Pvt Ltd.
  2. Mindspace ESOP Consultants Private Limited
  3. ESOP Direct
  4. Corporate professionals pvt, ltd.