After raising $3.6 billion (about Rs 26,805.6 crore) in its latest funding round, e-commerce major Flipkart has announced a buyback of employee stock options (ESOPs) worth Rs 600 crore ($80.5 million), which is likely to benefit thousands of its employees, according to a ToI report.
While only time can reveal the prominent beneficiaries, it has been learned that around 6,000 employees have the option to liquidate up to 10 percent of their vested ESOPs. The ESOPs are granted to the staff on the basis of their tenure, performance and contributions to the company, and they can liquidate their options based on their holding patterns.
“This year, we are pleased to announce a buyback of 5 percent of the past three years' vested options. With this landmark event… we are offering our employees an additional buyback of 5 percent of all vested options as we stay committed to wealth creation for you," Flipkart Group Chief Executive Officer Kalyan Krishnamurthy said in an email to employees.
Walmart-backed Flipkart has over 15,000 full-time employees in India.
With the latest funding round, led by a clutch of investors, including Singapore sovereign wealth fund GIC, Canada Pension Plan Investment Board, SoftBank Vision Fund 2 and Walmart, the value of the e-commerce major now stands at $37.6 billion (around Rs 2.79 lakh crore).
What is an ESOP?
ESOP is a widely used retention tool, allowing employees to purchase the securities of their company at a pre-determined price within a defined exercise period. Stock options are subject to a vesting period, which could be based on the service tenure or performance, or a combination of both.
An MSN article quotes Ankur Pahwa, EY India's e-commerce and consumer internet leader, as saying that now ESOP has also become a tool for wealth creation in India on the lines of the Silicon Valley.
In 2019-20, Flipkart India repurchased 48,897 ESOPs, compared to 1,87,974 the year before. On the other hand, it granted 2,04,940 ESOPs during 2019-20, compared to 2,94,187 the previous year. The weighted average fair value of the granted options was $106.9, compared to $111 in 2018-19, according to MCA documents.
When Walmart acquired Flipkart in 2018, it had reserved $500 million to buy back ESOPs from the staffers.
Many new-age companies, including Swiggy, Zerodha and Razorpay, have been buying back ESOPs.
In April, Paytm too expanded its ESOP pool to $604 million from around $33.4 million in 2020.
