The recent rally in Indian equities has been viewed as a boon by several top executives of bluechip companies. According to stock exchange disclosures, key executives of many listed entities gained by selling their shares in the open market.
Data available on exchange websites show that members of the top brass in companies like Reliance Industries, Larsen & Toubro, Sun Pharma, Lupin, Kotak Mahindra Bank and Tata Motors among others sold their shares in the recent past.
Market experts say the most obvious reason seems to be the rally in the Indian market that gave company officials a significant return on their shares, which in most cases were received by way of stock options. Most officials sell their shares due to personal reasons, they add.
?In most cases it could be ESOPs. Employees are entitled to sell their shares and earn better returns. Employee’s personal or financial requirements may have prompted such transactions. The rally may have helped too, as it makes sense to sell when prices have appreciated rather than selling them when prices were depressed,? said K Sandeep Nayak, ED & CEO, Centrum Broking.
Interestingly, the recent past has seen the Indian benchmark indices post significant gains on the back of strong inflows by foreign institutional investors (FIIs). In the current calendar year, the Indian indices have gained more than 20% while FIIs have invested nearly $18 billion in the equity market.
For instance, N Hariharan, company secretary of L&T exercised 1,200 shares (of the 17,277 equity shares of R2 each held by Hariharan) on September 14. Similarly, Lupin executives Khushiram Gupta sold 20,420 shares (of 25,240 shares held) and Atish Majumdar sold 7,250 shares (of 7,750 held) in September end-October first week.
PK Kapil of Reliance Industries sold 1,000 shares (of the total 11,276 shares held) on September 17, while Parminder Verma of Kotak Mahindra Bank sold 5,700 shares on October 3.
Markets experts also stated that certain companies do not allow their employees to hold ESOPs after resigning the company and are either asked to opt out or sell their holdings in open market. Other exercise their right for issues related to taxation, they add.
According to the Ministry of Finance, any gain beyond tax value of the shares is subject to capital gains tax depending on whether the shares are listed in India and the period of share holding.
For listed shares where the securities transaction tax is paid, there would be no tax if shares are held for more than one year, but taxed at 15.45% if held for less than one year. In case of unlisted shares, the tax rate is 20.3%, if held for more than one year; if held for less than a year, it is taxable at normal rates of taxes (based on the income slab).
