12. Stock based compensation

The Company has issued options under the Genpact Global Holdings 2005 Plan (the "2005 Plan"), Genpact Global Holdings 2006 Plan (the "2006 Plan"), Genpact Global Holdings 2007 Plan (the "2007 Plan") and Genpact Limited 2007 Omnibus Incentive Compensation Plan (the "2007 Omnibus Plan") to eligible persons who are employees, directors and certain other persons associated with the Company.

From the date of adoption of the 2007 Omnibus Plan on July 13, 2007, the options forfeited, expired, terminated, or cancelled under any of the plans will be added to the number of shares otherwise available for grant under the 2007 Omnibus Plan. The 2007 Omnibus Plan was amended and restated on April 15, 2011.

The stock-based compensation costs relating to above plans during the nine months ended September 30, 2010 and 2011, were $14,912 and $17,648 respectively, and for the three months ended September 30, 2010 and 2011, were $4,661 and $9,129, respectively, have been allocated to cost of revenue and selling, general, and administrative expenses.

There are no significant changes to the assumptions used to estimate the fair value of options granted during the nine months ended September 30, 2011.

A summary of the options granted during the nine months ended September 30, 2011 is set out below:


	Nine months ended September 30, 2011
	Shares arising out of options			Weighted average exercise price		Weighted average remaining contractual life (years)		Aggregate intrinsic value
Outstanding as of January 1, 2011		15,989,356		$	10.84		6.4	$	—
Granted		250,000			15.34		—		—
Forfeited		(1,089,821	)		14.36		—		—
Expired		(164,922	)		15.49		—		—
Exercised		(946,840	)		10.68		—		3,990

Outstanding as of September 30, 2011		14,037,773		$	10.60		5.7	$	63,430

Vested and exercisable as of September 30, 2011 and expected to vest thereafter (Note a)		13,353,241		$	10.60		5.7	$	60,774
Vested and exercisable as of September 30, 2011		7,904,260		$	8.21		4.9	$	52,557
Weighted average grant date fair value of grants during the period	$	6.21

(a)	Options expected to vest reflect an estimated forfeiture rate.

As of September 30, 2011, the total remaining unrecognized stock-based compensation costs for options expected to vest amounted to $20,479, which will be recognized over the weighted average remaining requisite vesting period of 1.92 years.

Share Issuances Subject to Restrictions

In connection with the acquisition of Axis Risk Consulting Services Private Limited in 2007, 143,453 common shares were issued to selling shareholders. Of the common shares that were issued, 94,610 common shares were issued to selling shareholders who became employees of the Company and are subject to restrictions on transfer linked to continued employment with the Company for a specified period. The Company has accounted for such shares as compensation for services.

A summary of such shares granted that are subject to restrictions and accounted for as compensation for services, or restricted shares, during the nine months ended September 30, 2011 is set out below:


	Nine months ended September 30, 2011
	Number of Restricted Shares			Weighted Average Grant Date Fair Value
Outstanding as of January 1, 2011		23,653		$	14.04
Granted		—			—
Vested and allotted		(23,653	)		14.04
Forfeited		—			—

Outstanding as of September 30, 2011		—		$	—

Restricted Share Units

The Company granted restricted share units, or RSUs, under the 2007 Omnibus Plan. Each RSU represents the right to receive one common share. The fair value of each RSU is the market price of one common share of the Company on the date of grant. The RSUs granted to date have vesting schedules of one to four years. The compensation expense is recognized on a straight line over the vesting term.

A summary of RSUs granted during the nine months ended September 30, 2011 is set out below:


	Nine months ended September 30, 2011
	Number of Restricted Share Units			Weighted Average Grant Date Fair Value
Outstanding as of January 1, 2011		1,016,000		$	13.61
Granted		954,848			16.27
Vested*		(144,250	)		10.58
Forfeited		(206,757	)		13.67

Outstanding as of September 30, 2011		1,619,841		$	15.44

Expected to vest		1,389,310

*	Vested RSUs include 48,000 RSUs, the shares in respect of which will be issued on December 31, 2012.

As of September 30, 2011, the total remaining unrecognized stock-based compensation costs related to RSUs amounted to $16,228 which will be recognized over the weighted average remaining requisite vesting period of 2.87 years.

Performance Units

The Company also grants stock awards in the form of Performance Units or PUs under the 2007 Omnibus Plan.

The Company granted PUs, wherein each PU represents the right to receive a common share based on the Company's performance against specified targets. PUs granted to date have vesting schedules of six months to three years. The fair value of each PU is the market price of one common share of the Company on the date of grant, and assumes that performance targets will be achieved. The PUs granted under the plan are subject to cliff or graded vesting. For awards with cliff vesting, the compensation expense is recognized on a straight line basis over the vesting term and for awards with graded vesting, compensation expense is recognized over the vesting term of each separately vesting portion. Over the performance period, the number of shares that will be issued will be adjusted upward or downward based upon the probability of achievement of the performance targets. The ultimate number of shares issued and the related compensation cost recognized as expense will be based on a comparison of the final performance metrics to the specified targets.

A summary of PUs activity during the nine months ended September 30, 2011 is set out below:


	Nine months ended September 30, 2011
	Number of Performance Units			Weighted Average Grant Date Fair Value		Maximum Shares Eligible to Receive
Outstanding as of January 1, 2011		895,333		$	15.38		1,343,000
Granted		1,682,196			15.05		2,346,995
Vested		—			—		—
Forfeited		(101,314	)		15.90		(145,393	)

Outstanding as of September 30, 2011		2,476,215		$	15.14		3,544,602

Performance units expected to vest		2,209,662

As of September 30, 2011, the total remaining unrecognized stock-based compensation costs related to PUs amounted to $24,400 which will be recognized over the weighted average remaining requisite vesting period of 1.92 years.

In the first quarter of 2011, the compensation committee of the board of directors of the Company modified the performance metrics for the performance grants made to employees in March 2010 from Revenue and EBITDA growth to Revenue and adjusted operating income growth.


	Original Performance Target						Modified Performance Target
Performance Level	Revenue Growth			EBITDA Growth			Revenue Growth			Adjusted Income from Operation growth
Outstanding		20.0	%		20.0	%		20.0	%		20.0	%
Target		15.0	%		15.0	%		15.0	%		15.0	%
Threshold		10.0	%		10.0	%		10.0	%		10.0	%

For the August 2010 performance unit grant to the former CEO, who changed his role to Non-Executive Vice-Chairman as of June 17, 2011, in addition to the modification made to the performance metrics from revenue and EBITDA growth to revenue and adjusted operating income growth, because the award vests based on annual performance targets whereas the awards to the employees vest based on average performance over three years, revision has been made to the performance targets in order to make the performance targets consistent with performance unit grants made to employees in first quarter of 2011.


	Original Performance Target						Modified Performance Target
Performance Level	Revenue Growth			EBITDA Growth			Revenue Growth			Adjusted Income from Operation growth
Outstanding		20.0	%		20.0	%		17.0	%		16.0	%
Target		15.0	%		15.0	%		12.5	%		12.5	%
Threshold		10.0	%		10.0	%		8.0	%		7.0	%

As a result of the above mentioned modifications, 45 employees were affected and incremental compensation cost of $4,109 is to be recognized over a period of 21.5 months starting from March 2011 to December 31, 2012. Out of the total incremental compensation cost, $2,878 and $ 1,231 is to be recognized over the years 2011 and 2012 respectively.

Employee Stock Purchase Plan (ESPP)

On May 1, 2008, the Company adopted the Genpact Limited U.S. Employee Stock Purchase Plan and the Genpact Limited International Employee Stock Purchase Plan (together, the "ESPP").

The ESPP allowed eligible employees to purchase the Company's common shares through payroll deduction at 95% of the fair value per share on the last business day of each purchase interval ending on or prior to August 31, 2009. The purchase price has been reduced to 90% of the fair value per share on the last business day of each purchase interval commencing with effect from September 1, 2009. The dollar amount of common shares purchased under the ESPP shall not exceed the greater of 15% of the participating employee's base salary or $25 per calendar year. With effect from September 1, 2009, the offering periods commence on the first business day in March, June, September and December of each year and end on the last business day in the subsequent May, August, November and February of each year. 4,200,000 common shares have been reserved for issuance in the aggregate over the term of the ESPP.

During the nine months ended September 30, 2010 and 2011, common shares issued under ESPP were 32,389 and 35,742, respectively.

The ESPP was considered as non compensatory under the FASB guidance on Compensation-Stock Compensation until the purchase interval ending on or prior to August 31, 2009. As a result of the change in the discount rate, the ESPP is being considered compensatory with effect from September 1, 2009.

The compensation expense for the employee stock purchase plan is recognized in accordance with the FASB guidance on Compensation-Stock Compensation. The compensation expense for ESPP during the nine months ended September 30, 2010 and 2011, was $51 and $64, respectively, and for the three months ended September 30, 2010 and 2011, was $17 and $24 respectively, and has been allocated to cost of revenue and selling, general, and administrative expenses.