Paytm share sale creates more than 20 millionaires
Latest secondary sale values Paytm, India’s second largest start-up, at $10 billion
New Delhi: More than 100 former and current employees of Paytm have become rupee millionaires as India’s second largest start-up completed stock sales worth Rs500 crore.
This includes Rs300 crore from the latest secondary sale of shares, which valued the digital payments and e-commerce platform at $10 billion. This is the company’s second sale of Esop (employee stock ownership plan) units after a Rs200 crore cash out by staff in mid-2017.
Some 20-25 people made over $1 million each (about Rs6-7 crore) in the latest sale aimed at rewarding staff.
The dollar millionaires include Paytm Canada’s chief executive Harinder Takhar, who cashed out over Rs40 crore (about $6.3 million).
Among the rupee millionaires was an office boy, who made over Rs20 lakh in the stock sale, Paytm, run by One97 Communications Ltd, said on Monday.
The company did not disclose other employee details.
Mint was the first to report the secondary sale to new investors like Discovery Capital at a valuation of $10 billion on 23 January.
Paytm’s latest valuation is $3 billion higher than what it was valued at in March 2017, when it raised funds from SoftBank Group Corp. of Japan.
“The secondary sale gave an opportunity to existing and former Paytm employees to liquidate their vested Esop units and create wealth. It also allowed various family offices and few Western long-hold funds to gain entry on the cap table with this round,” the company said, without disclosing the name of the new investors.
The company’s existing investors include SoftBank, SAIF Partners, Alibaba Group Holding Ltd and Ant Financial Services Group.
“The company’s Esop pool isn’t restricted to top- or mid- level executives, but employees and office staff who have been around (with the company) from early days,” said a company spokesperson.
“There are another 100-150 more employees who are dollar millionaires on paper,” said founder Vijay Shekhar Sharma, who liquidated 1% of his stock last year to raise Rs325 crore for Paytm’s payments bank business.
Esops are financial instruments that allow employees to own shares that they may sell for cash after a predefined period of time.
In December, India’s largest start-up Flipkart completed a $100 million repurchase of Esops, the largest-ever share buyback programme in the history of the Indian start-up ecosystem.
More than 3,000 existing and former employees of Flipkart and its group companies, Myntra, Jabong and PhonePe, participated in the share repurchase programme.
Flipkart has now completed at least four such buybacks, though none on the scale of the buyback in December.
The Paytm and Flipkart stock sales are important because the Indian start-up ecosystem has been criticized for offering stock rewards that almost never materialize into actual gains for start-up employees, sometimes even after a sale. For instance, bus ticketing platform Redbus was widely criticized for lacking a lucrative Esop programme when it sold out to Naspers Ltd in 2013.
The Paytm and Flipkart stock sales will help start-up Esops recover some credibility.
Unlike at established companies, Esops are a significant component of compensation at start-ups. It’s not unusual for employees who join start-ups to accept pay cuts and make Esops a large part of their overall compensation.