Walmart begins to buy shares from current, former Flipkart staff

New Delhi/Bengaluru: Festive celebrations are set to begin early at Flipkart, with its new owner Walmart Inc. starting the process of buying back shares from current and former employees of India’s largest e-commerce company.

US-based Walmart, which acquired Flipkart for $16 billion in May, will purchase the shares at $126-128 apiece, according to several employees who were informed of the offer through emails from the management of Flipkart.

Mint has reviewed the contents of the email.

As part of the employee stock option (ESOP) buyback plan, former employees will be able to cash out only 30% of their shares. They will have to hold on to the remainder of their holdings for an undisclosed period, the email showed. Current employees can, however, cash out half of their stock holdings immediately, and a quarter a year later.

The remainder can be sold back to Walmart two years after the first liquidation.

While current employees received the missive from the company earlier during the week, a number of former employees received the email on Tuesday. Walmart has set 28 September as the deadline for completing the buyback process. A back-of-the-envelope calculation shows that the shares will be bought back at a valuation of $21 billion—similar to which Walmart acquired the 77% stake in Flipkart.

“We take immense pride in being the employer of choice and believe in rewarding employees by making them partners in the organisation’s success. The ESOP repurchase programme, a yardstick for the industry, is part of our continuing efforts to thank and reward our employees for their service,” said a Flipkart spokeswoman in an email.

The latest ESOP buyback at Flipkart is one of the rare instances of employees in India’s start-up ecosystem receiving a payout of this scale, with headhunters comparing it to the ESOP programme that software major Infosys had created for its employees, many of whom turned millionaires after the information technology major went public in the 1990s.

Flipkart’s employees have gained previously as well from share buybacks. In the past six years, there have been at least five other buybacks in Flipkart, including a $100 million repurchase last year.

In a Securities and Exchange Commission filing earlier in September, Walmart said Flipkart had allocated about 11.95 million shares for its employees. Walmart is obligated to buy about 6.24 million of those shares, indicating that the company may have to set aside nearly $800 million to keep its commitments.

However, Walmart will actually spend much less, as it is only buying 30% of the shares held by former employees. Mint reported in May that the retail giant had set aside about $500 million for the share buyback.

In May, Mint also reported that Flipkart’s employees would be able to cash in their vested stock options at $125-129 per share, after Walmart completes its mega takeover. At the time, Mint had said that a number of former employees of Flipkart felt that they had been treated unfairly, since Walmart was buying only 30% of their shares.

Flipkart issued an email to roughly 300 former employees in May informing them about the share repurchase plan for ex-employees, saying that it “was unmatched among private companies in India”.