A rude shock

FE NEWS SERVICE

The Centre's decision to transfer six lakh shares of VSNL from its kitty to the employees of the company for a consideration of Rs 294 per share could have come as a rude shock to the stock markets. The scrip trades at around Rs 900 on the bourses, and VSNL employees would have been quick to respond to an excellent opportunity to make windfall gains. Though the six lakh shares constitute less than 1 per cent of the company's outstanding equity, the selling pressure generated would have resulted in a crash in the scrip's prices. This is because despite the huge outstanding equity, the company's floating stock is small. By imposing a three-year lock-in period, however, the Government has demonstrated that it has examined the fall-out of its decision in detail and has taken effective steps to tackle the possible negative outcomes.

Yet it appears that the most important issue of the principle behind such largesse has not been given much thought. While on the one hand, the Government is considering an infusionof an additional Rs 75 crore into the company's net worth and a further grant of Rs 68 crore for a voluntary retirement scheme, on the other, it is offering an incentive to all employees to stick on. In the absence of competition, at this juncture, there is little need for VSNL to offer additional sops to retain even key talent. The argument the Government appears to have in favour of the scheme is that it will lead to staff welfare. VSNL's employees are not an underpaid lot, and therefore, this argument has little strength. The Government is any way expected to offer its holdings to the public at a discount, and the same offer ought to apply to VSNL's employees too.

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