Satyam Computer: Notes to accounts for year ended March 2001

Ezhil Meenakshisundaram

THE scheme established prior to SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999, (SEBI guidelines on Stock Options).

In May 1998, Satyam Computer established its Associate Stock Option Plan (the `ASOP'). The company subsequently established the Satyam Associate Trust (the `Trust') to administer the ASOP and issued warrants to purchase 13 lakh equity shares of Rs 10 each in the company.

In turn, the Trust periodically grants eligible employees warrants to purchase equity shares held for issuance to the Trust. The warrants may vest immediately or vest over two-three years, depending on the employee's length of service and performance. Upon the completion of the vesting period, employees have 30 days to exercise the warrants. The exercise price of the warrants was fixed at Rs 450 per warrant.

At the Annual General Meeting in May 1999, shareholders approved a 1:1 bonus issue to all shareholders as of August 31, 1999. To ensure that all its employees received the benefits of the bonus issue in September 1999, the Trust exercised all its warrants to purchase the company's shares before the bonus issue using the proceeds of bank loans. Subsequent to this, each warrant entitles the holder to purchase two shares of Rs 10 each of the company at a price of Rs 450 per warrant plus a predetermined interest component associated with the loan, the Trust assumed to convert the warrants it held.

Scheme based on SEBI Guidelines: The Securities Exchange Board of India (SEBI) had issued the Employee Stock Option Scheme and Employee Stock Purchase Scheme Guidelines, 1999 which are applicable for all stock option schemes established after June 19, 1999. In accordance with these guidelines, the excess of the market price of the underlying equity shares as of the date of the grant of the option over the exercise price of the option, including upfront payment, if any, is to be recognised and amortised on straight line basis over the vesting period.

The company has established a scheme ``Associate Stock Option Plan -- B'' (ASOP-B) for which 130 lakh shares of Rs 2 each were earmarked. Eligible employees of the company are granted stock options out of the said scheme in accordance with the internal guidelines.

Accordingly, options for a total number of 72,04,791 shares of Rs 2 each were granted up to March 31, 2001. The costs relating to the grant of options is dealt with in accordance with the accounting treatment prescribed by SEBI.