Readings: Stock appreciation rights, Venture capital in India
- Financial Express: Stock appreciation rights soften ESOP blow
Companies are exploring stock appreciation rights (SAR) to get over the blow dealt by finance minister P Chidambaram on employee stock option (ESOP) plans in this year’s Budget.
In SAR, a company gives its employees a formal option to profit from any appreciation in the value of its shares. It is, therefore, a stock option. But, it is different from Esops that do not require employees to pay for the SAR when it is offered. Instead, they pay when they exercise their right to buy it.
Venture capital firms, led by Silicon Valley’s best of breed, have raised close to $2 billion (Rs8,000 crore) for investment in India since January 2006.
Key target areas include product development, the Internet and mobile, and next- generation outsourcing services. Some of it will fund consumer services businesses in the retail, hospitality, health-care, entertainment and media sectors.
Most are looking to invest between $200,000 and $5 million per company. The typical investment model would be to enter a company with seed funding, which could be as small as $75,000, and scale up as the company grows. The investment horizon in each company would be three-five years.
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