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After the close of normal trading session in the Indian stock market on Thursday, September 24, the country’s leading natural resources and mining group Vedanta Limited has submitted a very important regulatory clarification to the stock exchanges. Vedanta’s shares closed at ₹267.95 with a slight decline of 0.83 per cent in Thursday’s trading session. Since the company’s detailed filing was officially uploaded on BSE and NSE at 4:39:51 pm, the fall recorded during the session was not related to this new announcement. The company has given point-by-point clarification on the outlines of its proposed Employee Stock Option Scheme i.e. ‘ESOS 2026’ and the questions being raised by the shareholders, which are directly related to the company’s corporate governance and future financial performance.
ESOS is a standard incentive plan offered by any corporate entity to its employees and officers to acquire equity shares of the company after specified terms and period. Generally, the question that arises in the minds of investors is whether employees will be given shares merely for completing years of service in the organization and what benefits this will bring to the company and the existing shareholders. Vedanta has completely cleared this doubt in its exchange filing and clarified that the eligibility to receive shares i.e. vesting rights under ESOS 2026 will be 100 percent linked to the actual results (Key Performance Indicators). The company has bluntly said that shares will not be automatically allotted to any employee merely on completion of three years of regular service. For this, it will not only be necessary for the employee to remain in the company, but at the same time it will be mandatory to meet the strict performance targets already set by the board. If an employee fails to achieve the prescribed minimum threshold, no equity benefits related to that scale will be provided to him.
The Company has put in place a clear framework for performance appraisal at various management levels to provide assurance to the shareholders. According to Vedanta, in the evaluation of senior and middle management, 50 percent weightage will be given to the overall financial and operational results of the respective business unit, while 40 percent weightage will be assigned to the individual performance of the employee and the remaining 10 percent weightage will be assigned to the larger strategic and long-term goals of the company. Whereas, in case of junior management officers, 50 percent weightage will be based on business results and 50 percent on their individual performance. The functioning of different metals and energy sectors within the group is of different nature, hence precise metrics like production volumes, operating cost reduction, free cash flow and working capital management will be used. The company has also clarified that the total value of options given to any eligible employee will not exceed his one year fixed salary. Apart from this, the company has promised to make public the complete details of the targets set and actual achievements in the upcoming annual reports.
The second biggest question among shareholders was why executives of its subsidiary Hindustan Zinc Limited (HZL) were being included in Vedanta’s basic share plan, when Hindustan Zinc itself is an independent and listed entity on the stock exchange. Vedanta explained the financial logic behind this and underlined that Hindustan Zinc is the strongest pillar of the group’s overall business and cash earnings. According to the company’s official data, Hindustan Zinc’s share in the consolidated EBITDA (EBITDA – earnings before interest, tax, depreciation and amortization) earned from Vedanta’s ongoing operations in the financial year 2025-26 has been more than 90 percent. Vedanta clarified that Hindustan Zinc executives had previously been part of its legacy share plans and the financial burden on their options had always been borne by Hindustan Zinc’s own balance sheet. Under the new scheme also, the costs for the legal entity for which the employee will serve will be borne by the same company and their options will be evaluated based on the independent performance of their own business.
The biggest concern among existing retail and institutional shareholders is about ‘equity dilution’, which often happens when a company issues new shares to provide employee benefits. Vedanta has clarified that for the execution of this scheme, a special trust will be formed, which will purchase the already existing shares from the open share market i.e. secondary market. The biggest advantage of this process will be that the company will not need to issue any fresh shares, as a result of which the current percentage of promoters and common shareholders will remain safe. However, just because the Trust purchases shares from the market does not necessarily mean that the employee will get the shares; Shares will be transferred only when set financial and operational targets are met. The practical situation for investors is that the company has not distributed any shares at present but has given a transparent clarification on the proposals placed before the shareholders. Now the market will keep a close eye on the decisions taken in the upcoming shareholder e-voting and the clarity of future goals.