OYO Rooms's share buyback may be first in a series of schemes that may yield employees holding ESOPs a total of $150-200 million in next 2-3 years
Bengaluru:OYO Rooms, India’s second-most valuable startup, will hold a share buyback in January, the first in a series of programmes that is expected to yield its former and current employees a total of $150-200 million over the next two to three years. About 250 ESOP (employee stock ownership plan) holders of OYO will be able to offer their shares in the first round estimated at about ₹ 40-50 crore. The hospitality chain declined to name the investor who will buy the shares.
“As a part of this effort, eligible option holders both existing and ex-employees will be rewarded for their loyalty and value created over the last four years by way of liquidating a portion of their stock options," Dinesh Ramamurthi, chief human resources officer at OYO Rooms told Mint. “The eligibility for awarding ESOPs was calculated based on the individual’s role, contribution, and long-term potential.
The move by OYO Rooms comes in a year that has seen many startups, including Flipkart, Paytm and Ola, offer cash to ESOP holders. This represents a major boost for the startup ecosystem that has struggled in previous years to prove that ESOPs matter as an avenue of compensation. Such liquidity events also track the general rise in exits at startups where secondary share sales have led to many early investors bagging attractive returns.
“Startups that are raising big rounds are using a small part of the proceeds to buy back some employee stock options," said T.N. Hari, HR head at BigBasket, which spent $4 million on buying back ESOPs last year. “It is a positive sign that helps employees realize that ESOPs don’t just have paper value but actually hold real monetary value."
Others who have organized ESOP repurchase programmes this year include financial technology company Razorpay, food-tech startup Swiggy and on-demand home services startup Urban Clap.
While Flipkart has had the highest number of ESOP repurchase programmes over the years, with the largest liquidation round being earlier this year when Walmart bought 77% of the company, other companies are also playing catch up by facilitating their first-ever ESOP repurchases this year.
Swiggy spent about $4 million earlier this year to buyback ESOPs from its employees. Logistics startup Rivigo is said to have spent ₹ 71 crore to buyback ESOPs and earlier this month, Urban Clap facilitated an ESOP repurchase programme worth $2-2.5 million.
In September, Oyo said it raised $1 billion from Japan’s SoftBank Vision Fund and other investors, making it India’s second-most valuable startup after Paytm, and the latest to join the coveted unicorn club.