Jun 15, 2022
Fables of ESOPs – The Origin Story
Do you know what ESOP stands for? Do you know what ESOPs are? How do I acquire ESOPs? Can I buy them? These are just
Welcome back to the July 2024 edition of Fables of ESOPs. Well, we can summarize July as a month of several hits and one miss in the world of ESOPs.
In terms of hits, Urban Company and Swiggy offered their largest ESOP Buybacks, giving employees the opportunity to create wealth. Further GST Council clarified regarding GST applicability in ESOP payments favouring companies with a foreign holding company. However, the conspicuous absence of ESOP taxation in budget was a missed opportunity.
Let’s dive into the details:
Swiggy is offering its employees the largest Employee Stock Ownership Plan (ESOP) liquidity program in its history, allowing them to sell a portion of their company stock options. This program, the fifth in the series, enables employees to sell shares worth $65 million.
Over 3,200 employees from various levels and departments at Swiggy are eligible to join the program. This opportunity coincides with Swiggy's upcoming initial public offering (IPO).
Dharana Capital, an investment firm focused on India, has purchased shares worth ₹400 crore, or $50 million, from Urban Company’s employees and other shareholders. According to the company, this transaction represents the largest liquidity event for employee stock options in Urban Company’s history.
Adda247 announced their ESOP buyback program at a purchase price 40 times it’s initial issue price resulting in multibagger value appreciation for their employees. The buyback comes a couple of years in advance to the planned IPO in 2026.
As part of their recent fundraising from Abu Dhabi Investment Authority (ADIA), Purplle has announced fresh ESOP liquidity worth INR 50 Crores, their largest so far. Combining all their previous buyback programs, about 85 of 320 employees with ESOPs have participated in liquidity programs worth INR 75 crores in total.
Paytm announced an expansion of its employee stock option plan (ESOP) pool by allocating 281,394 equity shares to its employees. These shares shall be allotted in accordance with the 2008 and 2019 Employee Stock Option Plans.
Consequently, Paytm's issued, subscribed, and paid-up equity share capital will now amount to Rs 636,274,090, consisting of 636,274,090 equity shares with a face value of Rs 1 each.
Paytm's decision follows reports that the fintech company, which is facing regulatory challenges with its subsidiary, may announce further layoffs in the current financial year. According to a report Paytm might reduce its workforce by around 15-20% as it contends with losses. In January, the Reserve Bank of India imposed business restrictions on Paytm Payments Bank, an affiliate of Paytm, leading to a significant impact on its financial and operational services. The digital payments firm reported a consolidated loss of Rs 549.6 crore in the fourth quarter of 2023-24.
Zomato shareholders recently approved a fresh ESOP Pool 2024 with an allocation of 183 million shares worth INR 3,742 crores. Zomato shares have seen a very good rally in recent months post their positive results in recent quarters.
Logistics firm Delhivery has expanded its employee stock option plan (ESOP) pool by allocating over 6.49 lakh stock options. This includes more than 3.42 lakh equity shares under the Delhivery ESOP 2012 plan, over 1.87 lakh equity shares under ESOP II 2020, and more than 1.19 lakh equity shares under the ESOP III 2020 scheme.
The newly allotted ESOPs are valued at approximately INR 25.45 crore. Following this allocation, Delhivery's paid-up share capital will increase to INR 73.91 crore from INR 73.85 crore.
Yubi, earlier known as CredAvenue, a full stack digital platform for investors has introduced new stock options for eligible employees worth Rs. 245 crores. They have issued 22 lakh new ESOP shares, 11 lakh in the old 2022 ESOP scheme and 11 Lakh in the new 2024 ESOP Plan. This has brought the total ESOP share to 49.08 Lakhs.
With this development, the total value of the company’s ESOP pool has surpassed the 1000 crore mark. Additionally, in a remarkable feat, 86% of the employees are now shareholders in the company.
Strides Pharma Science Limited is a pharmaceutical industries firm based in India and is in Bangalore. It focuses on the development and production of niche pharmaceuticals, over-the-counter medications, and nutraceuticals. The company has an approximate employee size of 10000.
It has recently issued 41,500 equity shares, each with a face value of Rs. 10, to eligible employees who exercised their stock options under the Strides ESOP 2016 Plan. Consequent to the above, the paid-up share capital of the Company has increased from Rs. 91,91,67,140/- consisting of 9,19,16,714 equity shares to Rs. 91,95,82,140/-consisting of 9,19,58,214 equity shares.
Vardhman Special Steels has allocated 35,250 equity shares, each with a face value of Rs. 10, to elig`ible employees who exercised their stock options under the 'Vardhman Special Steels Limited Employee Stock Option Plan, 2016 and 2020. This involves 17,625 bonus shares issued at a 1:1 ratio for the ESOP shares.
Crompton Greaves Consumer Electricals allotted 52,250 equity shares under its ESOP. As a result, the company's paid-up capital increased from Rs. 1,28,65,58,152, divided into 64,32,79,076 equity shares, to Rs. 1,28,66,62,652, divided into 64,33,31,326 equity shares.
Crompton Greaves Consumer Electricals Limited is a leading electrical equipment company. The company offers lighting and electrical consumer products, including LED lighting, fans, pumps, and household appliances such as water heaters, air coolers, and kitchen appliances.
Infosys has issued 86,477 equity shares with a face value of Rs 5 each following the exercise of Restricted Stock Units by eligible employees. As a result, as of June 26, 2024, the company's issued and subscribed share capital has increased to Rs 20,76,05,74,760, divided into 4,15,21,14,952 equity shares with a face value of Rs 5 each.
In other listed companies, Nykaa, Tracxn, Rategain, too have made ESOP related allocations as per regulatory filings.
In a big relief to ESOP holders of Indian subsidiary of a foreign holding company, the GST council of India has clarified that there is no GST applicable for reimbursement payments made by employer company to group company issuing shares to the employees.
The clarification regarding non-taxability of reimbursement for shares is welcome and would end disputes on this issue for companies already facing scrutiny of such reimbursements.
Nykaa, a leading Indian beauty and lifestyle retailer, has allocated 17.3 lakh shares under its Employee Stock Option Plan (ESOP) to incentivize its employees and align their interests with company growth. This move is part of Nykaa's strategy to retain talent and attract talent among its workforce, as the company continues to expand its market presence. The allocation highlights Nykaa's commitment to rewarding its employees amid its strong performance in the e-commerce sector.
Tracxn, a Bengaluru-based data intelligence platform, has allocated 3.6 lakh shares under its ESOP plan, valued at INR 3.5 crore based on the stock's last closing. This allotment increases Tracxn's total paid-up share capital to INR 10.45 crore from INR 10.41 crore. Employees can exercise these options within five years from the vesting date. This comes a month after Tracxn allotted 2.06 lakh shares under the ESOP 2016 plan on June 7, which raised the paid-up share capital from INR 10.39 crore to INR 10.41 crore.
RateGain, a travel and hospitality industry, has allotted 23,880 equity shares under its ESOP 2015 and 36,024 equity shares under the Stock Appreciation Rights Scheme 2022, totaling 59,904 shares. This allocation increases RateGain's paid-up share capital from INR 11.78 crore to INR 11.79 crore. At Tuesday's opening price, these newly allotted shares are valued at approximately INR 4.49 crore. The Nomination and Remuneration Committee finalized the allocation.
To sum up, July saw many more Fables Of ESOP getting realized with record ESOP liquidity programs offered by Swiggy and Urban Company as well as fresh ESOP allocations in some the recently listed startups such as Zomato, PayTM, Nykaa, Delhivery among others.
Further the recent GST council clarification on GST applicability in ESOP reimbursements is a welcome step to clarify regulations involving ESOPs. One missed opportunity however
With new legislative changes expected in the future, the ESOP market is shifting, it is good to stay informed of the new changes.
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