It's raining Esops in India this year
2 min read 06 Dec 2021, 12:40 AM ISTFlipkart leads the pack by buying back Esops worth ₹600 crore
PremiumNEW DELHI : Startups are bending over backwards to sweeten deals to hire and retain employees in an increasingly competitive market.
Year to date, 32 Indian startups have spent close to ₹3,000 crore, or about $440 million, to buy back employee stock options (Esops), a VCCircle analysis showed.
Esop buybacks have become a popular way for startups to incentivise workers on the hunt for new opportunities that offer growth, higher payouts, and the remote work option as the economy rebounds after pandemic-related curbs were eased.
In addition, large fundraisings during the year have helped them announce generous buybacks. One in three startups that announced Esop buybacks turned unicorns this year.
This year, startups that offered to buy back Esops include BrowserStack, UpGrad, ShareChat, Zetwerk, Meesho, Licious, Vedantu, Moglix, PharmEasy, Acko and Cred.
Esops buybacks help employees of unlisted companies to sell their shares for cash. Esops are usually offered to qualifying employees during hiring, appraisals or at the time of reward programme announcements.
They have a vesting period during which the employee cannot sell the holdings, but once this period is over, the company may facilitate a buyback option, or the employee may choose to sell the shares as part of a secondary offering during fundraising
Flipkart pioneered the trend in 2018 when it announced a buyback of all vested options and continues to lead the charts this year in terms of the buyback size. The e-commerce marketplace raised a mega funding round worth $3.6 billion at a valuation of $37.6 billion in July.
As part of the round, it bought back Esops worth $80 million, or about ₹600 crore, a generous cash offering to the holders of vested employee options.
Additionally, Flipkart-owned fintech unicorn PhonePe bought back Esops worth ₹135 crore last month.
Software testing startup BrowserStack announced a couple of Esop buybacks during the year, putting it second on the list.
While the size of its Esop buyback announced in February is not known, BrowserStack paid $50 million in the second tranche of the buyback in September.
Food-tech giant Swiggy, which claims to employ close to 500,000 people, announced a $40 million buyback in October that will be implemented over the next two years.
Twelve companies, including Zerodha, Swiggy, Unacademy, FirstCry, Urban Co. and Meesho, bought close to $50 million worth of Esops from their employees in 2020, according to a 16 July report by Entrackr, a news website on startups.
Companies that paid over $25 million to their employees to buy back vested options include edtech unicorn UpGrad (worth ₹220 crore) and bootstrapped brokerage Zerodha (worth ₹200 crore). It bought back Esops worth ₹65 crorel in 2020.
