Ecommerce giant Flipkart has issued a $100 Mn (INR 700 Cr) worth employee stock ownership plan (ESOPS) for its senior and middle-level staff across Flipkart and Myntra-Jabong, in a move to hold onto its key talent.
According to an ET report which cited anonymous sources, the ESOP allocation was done as a part of the company’s annual performance assessment programme which was concluded last month.
Employees have been allotted these new shares at a price of $125-$130 per unit and will see 25% of their stock vest after a year. Following this, monthly vesting will continue for three years.
For the uninitiated, the vesting period refers to the time between allotment of shares in an ESOP and when the shares are fully owned by the employees.
“Stock options is part of our culture to reward ownership and we’re unique for this. Beyond this we can’t share any details or specifics,” a Flipkart spokesperson said in response to Inc42 query.
The sources also that the amount of ESOPs is different for different employees who have been either promoted or are high performers.
According to sources, the company is also considering an IPO in 2021 to have possible liquidity options besides share buyback by the parent company.
This is Flipkart’s second Espo allotment after Walmart came onboard with the previous grants having been disbursed in November 2018.
Last year in August, Walmart acquired 77% of Flipkart for $16 Bn. Following the deal, Walmart had purchased employees ESOPs worth nearly $800 Mn from Flipkart. The company’s total ESOPs are worth $1.5 Bn based on the per-share purchase price.
In May 2018, Flipkart had brought shares from a set of existing investors for $350 Mn in order to reclaim its status of a private company – Flipkart Pte Limited.
Following Walmart-Flipkart deal, Flipkart saw a major restructuring with its both cofounders Sachin Bansal and Binny Bansal exiting the company. This move may help the ecommerce giant hold onto its top-level employees especially at a time when the competition in ecommerce is set to grow with Reliance’s plan to foray into the market.
ESOPs are used to incentivise employees contributions to the startup and reduce attrition rates thus several Indian startups have been looking to offer stock ownership in the form of ESOPs
Recently, it was also reported that Department for Promotion of Industry and Internal Trade (DPIIT) is discussing with the finance ministry to tax Employee Stock Ownership Plan (ESOP) options only once at the time of sale. Currently, ESOPs are considered as income and are taxed accordingly
This move comes as part of the government’s effort to make India a more conducive location for startups.
Last month, automobile startup CarDekho announced that it will buy back shares worth $2.5 Mn (INR 17.5 Cr) from its employees, under the Girnar group ESOP repurchase plan, 2019. The company had circulated the offer letter to 71 eligible employees to participate in the repurchase plan.
Hotel aggregator OYO also announced its first ESOP last year for 250 employees in a secondary share acquisition programme worth $5.7 Mn – $7.1 Mn (INR 40-50 Cr).