The head honchos of the banking and financial services sector are cashing in on the recent rally in the markets by selling their shares. As the benchmark indices hit new highs in March induced by the Bharatiya Janata Party’s landslide victory in key states, the top brass of HDFC, ICICI Bank and Axis Bank have cashed in by liquidating a part of their holding.
On March 15, HDFC Vice-chairman and CEO Keki Mistry sold stock worth Rs 16 crore, while Axis Bank Executive Director (retail banking) Rajiv Anand sold shares worth Rs 1.29 crore. Chanda Kochhar, managing director and CEO at ICICI Bank, sold 100,000 shares for Rs 2.86 crore.
Typically, company insiders — promoter or key management personnel — selling stock is perceived as parameter to gauge the performance of the company and the confidence they have in the firm’s future. For corporate chieftains, selling stock becomes mandatory to generate liquidity to exercise the stock options allotted in previous years.
A large part of the senior management’s compensation comes in the form of stock options which tend to mature at regular intervals and need to be paid for when they get converted, a senior banker said. This is a big reason for the sale in the month of March as the previously allotted options tend to mature in the new fiscal year.
Explaining the rationale behind Mistry selling shares in the market on March 15, an HDFC spokesman said: “The reason the shares were sold was to generate liquidity to exercise old ESOPs, else these ESOPs would lapse as they need to be exercised within a given time frame.” Mistry has bought more than double the shares than what he sold on March 15.
Axis Bank CEO Shikha Sharma had on March 3 and March 7 sold securities worth Rs 2.57 crore.
Responding to Moneycontrol’s emailed query, an Axis Bank spokesperson said Sharma is not a net seller of Axis Bank stock. “As reported on NSE and BSE websites, Ms. Sharma has been consistently buying shares of the bank through exercise of ESOPs and has correspondingly sold shares, leaving her net holding steady,” the spokesperson said in an email.Given that shares get converted every year and new allotments are made ahead of a board meeting at the start of a new fiscal, many employees sell stock for liquidity. Since stock options are part of compensation, most professionals tend to liquidate their holding to take care of other personal expenses such as buying a new house or education of children.