Move is proposed as performance grant under ESOS
The size of the proposal accounts for two per cent of the total number of paid up shares of the bank – which is 17.35 crore, with a face value of Rs10 each. Once the proposal is ratified by the CSB Bank shareholders at the upcoming general meeting on July 20, 2020, the RBI needs to give its green signal.
The board has already approved the ‘bonanza’ to the MD & CEO for the period between December 9, 2016 and December 8, 2019 under the CSB Employee Stock Option Scheme 2019 at an exercise price of Rs75 apiece.
Talking to businessbenchmark.news, sources close to the bank said even if the shareholders ratify the move at its AGM, RBI reserves the final say on the matter.
It’s relevant to mention that a similar move to grant 16.19 lakh shares upfront to the same MD &CEO as hiring grant in April 2017, just few months into taking the helm of the bank, had been shot down by RBI vide a letter in 2018.
At the Friday’s (July 10) closing price of CSB Bank shares at around Rs186.5, the performance grant will fetch the MD &CEO a (notional) gain of about Rs38.69 crore. This might help get a perspective of how far the bank is keen to reward the MD &CEO for his performance during the past more than three and half years.
“The ESOS options are to be vested over 3 years from the date of actual grant by the Nomination and Remuneration Committee subject to the approvals/modifications of the Reserve Bank of India (RBI),” the bank explained.
According to a practising chartered accountant, the bank, which has reported a profit of just Rs12.72 crore for FY20 and a loss of Rs197.92 crore a year ago, will have to take a hit to its profit & loss (P&L) to the extent of gain the MD& CEO books from the sale of these shares.
“There will be a charge-off to the bank’s profit before tax (PBT), proportional to the number of options he chooses to vest during the given year,” he explained.
The bank has stated that it feels the continuance of the service of CVR Rajendran as managing director & CEO of the bank at this juncture is essential to maintain and improve the tempo of the bank’s growth and progress.
The CSB Bank shareholders are unlikely to block the ‘share grant’ to the MD as they have historically been against disturbing such meetings, and more so this time, as the bank will be holding a virtual meeting in the COVID context.
In the meantime, RBI has already approved the board proposal for a variable pay of 45 lakh and revision of MD’s annual fixed pay from Rs75 lakh to Rs2 crore.