Esop Alert: Temasek Buys $30 Mn Ola Shares From Former, Early Employees

The Singapore-based Temasek Holdings has bought shares worth $30 Mn from former and early employees of the cab-hailing company Ola as part of a secondary share sale.

The share sale has valued the company at around $2.5-3 Bn and was completed around May-end. This has enabled large-scale Esop encashment for former and early employees of Ola.

An Esop or employee stock ownership plan is an employee-owner programme that provides a company’s workforce with an ownership interest in the company.

In an Esop, companies provide their employees with stock ownership, often at no upfront cost to the employees. Esop shares, however, are part of employees’ remuneration for work performed. Shares are allocated to employees and may be held in an Esop trust until the employee retires or leaves the company. The shares are then sold.

At the same time, Ola is also looking to raise funds from Temasek in a separate deal which will be a combination of primary and secondary capital. As part of that deal, Temasek is expected to purchase about $150-200 Mn of secondary shares in Ola giving significant exits to some of Ola’s earliest investors.

Ola: Stepping Into International markets Aiming Profitability

Seven-year-old company founded by Bhavish Aggarwal and Ankit Bhati has been strongly expanding its footprint in the country across 110 cities with over 1 Mn driver partners. It has 14 service categories and ferries 2 Mn people every day.

At the same time, the company has now expanded to international waters beginning with Australia, where it has recently started its operations in Adelaide.

Recently, CEO Bhavish Aggarwal informed his employees that the company is now profitable on every ride and aims to be a profitable venture by 2018.

In FY17, Ola’s operating loss increased 32% to $543.5 Mn (INR 3,731 Cr) while its operating revenue more than doubled to $171.6 Mn (INR 1,178 Cr).

The company has projected curtail its net operating loss to $179.94 Mn (INR 1,235 Cr) for the year ending March 2019 and reach a profit of $108.67 Mn (INR 746 Cr) for the year ending March 2020, according to its latest valuation report filed with MCA for the acquisition of public transport ticketing application Ridlr.

Till March 2018, Ola had raised funding of $3.9 Bn in 11 rounds from about 20 investors. Ola, which is owned by ANI Technologies Pvt Ltd, is setting up a group holding company that will own Ola Cabs, Foodpanda, and its other businesses that are still in the nascent stage, such as its electric cabs and international operations.

Esop: Keeping Employees Happy

The Esop encashment at Ola has come at a time when Walmart-acquired Flipkart’s former and current employees are also set for massive Esop payouts.

Flipkart emailed employees to share that it will repurchase up to 30% of its former employees’ vested Esops at a share price ranging from $125 to $129.

Further, employees can liquidate their stock options in three instalments — half of the stock on the date of closing of the Walmart deal, 25% a year later, and the remaining stock options two years after the first liquidation.

Recently, the board of newest Unicorn food delivery company Swiggy approved its first employee stock repurchase programme. The share buyback or Esop, which had to be implemented in June, was estimated at over $4 mn (INR 27 Cr).

In addition to the Esop saga, founder and CEO of Paytm Vijay Shekhar Sharma had also pledged about 5% of his personal holding in Paytm Mall for the Esop pool. This move added about $50 Mn worth of stocks to the Esop corpus.

Further, early this year, furniture player Urban Ladder joined the Esop bandwagon and offered Esops in order to attract senior-level talent, according to the MCA documents filed by the company.

With Esop keeping Ola employees happy at a time when it is foraying into international waters, the company is well positioned to strengthen its presence in India as well as the world.

[The development was reported by Livemint.]