Which was wise decision - Infosys stock option or abroad?

[Ind1an]

I am curious to know which decision is wise in terms of net savings?

[A] A person who joined Infosys (campus hire) 10 years ago for STOCK OPTIONS and settled in India
A person who did his Masters abroad and earning decent salary abroad (US/UK)?

After 10 years, if person B plans to R2I, who has better bank balance - Person A or B?

[sftrade]

Firstly Infosys grants no stock options to new grads and as years progress you end up with minute quantities of the stock. Also the salaries were peanuts 10 years ago. It is only in the last few year salaries have been bumped up in India substantially. Even if Infosys deputed you onsite their onsite pay was 40% lower then what you could get in the local market.

The US based grad could easily get a salary of 80k and then progress to 140k minimum over 10 years.

Now the bigger question is whether the Infosys employee bought a house in 2003 in Bangalore and if he did that house would've appreciated atleast 3 times in value totally wiping out any deficit he had with his US based counterpart. If the US based employee were to R2I he would be hardpressed to buy the same size house in the same location as that of the Infosys employee, thereby in terms of net worth he would be less well off then the Infosys based employee.

[willynilly]

Now the bigger question is whether the Infosys employee bought a house in 2003 in Bangalore and if he did that house would've appreciated atleast 3 times in value totally wiping out any deficit he had with his US based counterpart. If the US based employee were to R2I he would be hardpressed to buy the same size house in the same location as that of the Infosys employee, thereby in terms of net worth he would be less well off then the Infosys based employee.

But what if, the US based employee had a decent size home in US ? Even if the home might have depecriated somewhat in value, it could still give him some lumpsum money to invest in a home in India.

[PeterGriffin]

Firstly Infosys grants no stock options to new grads and as years progress you end up with minute quantities of the stock. Also the salaries were peanuts 10 years ago. It is only in the last few year salaries have been bumped up in India substantially. Even if Infosys deputed you onsite their onsite pay was 40% lower then what you could get in the local market.

One important factor to consider here is that, the IT boom which picked up pace in mid 2003/early 2004 was short on knowledge capital when it came to multi-million $ projects. Their only option was to groom the mid-level/junior level managers working in these Indian companies(local talent) for these mega projects and this resource pool started develop over time. In the last 2-3 years, NRIs are finding it difficult to penetrate into these senior level positions as these occupational baby-boomers have pretty much secured their territories. A LOT of my friends who stayed in India since 96 are now in much senior positions (Partner/Sen. Engagement managers) etc. in companies such as Infy/Wipro/Accn. In retrospect, working in Infy for the last 10 years would be my option as i'm pretty sure, i would have scaled some peaks in my career.

[sftrade]

Basically if someone went to the US in 2000 to get his masters it would take him altleast 5 years to settle down and finally own a house. Very few have managed to do it in less then 5 so any purchase in 2005 would almost breaking even in 2010. Zillow will show that many bay area cities are down to 2004 levels. Even if the R2Ier has broken even and sells the house and gets the down payment he/she is now going to buy at Bangalore's peak. Net net a lose-lose situation

[ss1122rr]

#2 -> from 2003 when you say appreciated 3 times in value, surely by house you mean flat. Even flats have gone up by more than that. A house would have gone up by atleast 7-8 times since 2003 if you consider the land prices. (In 2000-2001, I did not have time during my 3 weeks vacation to finalise the paperwork on a site in HSR. It was then 500 Rs sqft negotiable :(((((

[Ind1an]

Thanks for all the valuable points. But I would like to compare just the stock options vs salary.
A person staying abroad could also have invested in India and it is more likely than someone working in Indian salary. A person working abroad would definitely have more international exposure and client facing skills. Granted if you have worked in the same organization for 10 years, you are bound to raise. A person coming back to India may start one or two levels below his Indian friends who stayed with the same org for 10 years. But eventually the R2I will surpass them within couple of years. I would expect R2Is to make lateral jumps and raise; but I don't expect someone working in one firm for 10years to change so easily.
So coming back to my original question: Assuming person A (in India) has sold X number of Infy stocks and made money and has Y number of stocks in his kitty. Is that more than the savings in of person B in the US/UK?

Please keep this thread to Stock options vs $$$ savings. We can discuss other points in a different thread.

[ahirman]

Firstly Infosys grants no stock options to new grads and as years progress you end up with minute quantities of the stock. Also the salaries were peanuts 10 years ago. It is only in the last few year salaries have been bumped up.

Wrong. Every infoscion was granted stock till middle of 2003. If you join as fresher you got stock, if you join as lateral you got stock. The amount of stocks depended on what your band was.

In 2003 one used to get extra share with promotions too.

Here is a back of the envelope calculation for minimum no of shares (if one has not left infosys for 5 years and didnt got a promotion between 2000-2003)
Fresher (2000) - 100 shares
Now multiply it by 16. Infosys has since issue 1:2 bonus shares twice and 1:4 bonus once since 2000.

So total shares 1600. Net value of shares based on current price ~ 40+ Lacs (doesnt includes the yearly dividends)
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Who has a better bank balance after 10 years. No one can say. It will all depend on individual and how he had used/invested the money and earnings. In most of the cases the MS guy should have more net worth if the Infosys guy is not a wise guy as far as investment aptitude is concerned.
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[ahirman]

. A person working abroad would definitely have more international exposure and client facing skills. Granted if you have worked in the same organization for 10 years, you are bound to raise. A person coming back to India may start one or two levels below his Indian friends who stayed with the same org for 10 years. But eventually the R2I will surpass them within couple of years. I would expect R2Is to make lateral jumps and raise; but I don't expect someone working in one firm for 10years to change so easily.

Too many assumptions in this post.
1. A person working abroad would definitely have more international exposure and client facing skills: Not necessary. Its not about quantity of exposure but quality of it. Infosys person may also have at least 4-5 years of onsite experience and that too in multiple countries, clients and cultures. He may have managed bigger teams and larger value projects.You are ignoring all of these.

2. But eventually the R2I will surpass them within couple of years. I would expect R2Is to make lateral jumps and raise: Why? just because he is R2I

3. I don't expect someone working in one firm for 10years to change so easily: Why does he needs to change. In 10 years he knows the business model and he has seen all the evolution first hand. He has 10 more companies who work in the same model to jump around too.

[sophisticuss]

money-wise i dont know...really depends on currency exchange rate in future also...
But oppurtunity wise - apart from H1 hold time-- you can branch out to anything in US...one of my friend who came with me in 1999 in IT in now a dentist...5 years he did it part-time and once he got GC , became full time student and started his own practise now..( upwards of 200K plus per year )..
another neighbour of mine in chennai , who also came also to US in same time period ventured out to hollywood by taking some coomunity college courses is one of big shots in pixar today in totally unrelated field...he said he made couple of presentations in an interview and he got a breakthrough...

while this can be done in India too , i think breaking the mold will be hard in india..( dont know now but was the case 10 years back ).