Ola Adds $46 Mn To ESOPs Pool For Employees As It Plans IPO

SUMMARY

Ola has offered to further issue of 1,536,230 equity shares

10 stock options are equivalent to one equity share with a face value of INR 10 each

Ola is looking to go public next year or two

Bengaluru-headquartered cab-hailing unicorn Ola has now extended its employee benefits pool (ESOP).

The company’s parent ANI Technologies in its extraordinary general meeting on December 24, 2019, sought to expand its ESOPs pool by adding $46 Mn (INR 326.45 Cr) with a further issue of 1,536,230 equity shares.

The filings with the Ministry of Corporate Affairs further showed that 10 ESOP stock options of Ola are equivalent to one equity share with a face value of INR 10 each.

Ola: Employees And IPO Plans

The decade-old company led by Bhavish Aggarwal and Ankit Bhati is now offering its services across 50 cities in India, UK, Australia and New Zealand. The company claims to complete over a billion rides annually with its over 1.5 Mn drivers. The company had been earning money on every ride since June last year.

Ola has raised over $3.8 Bn from marquee investors such as SoftBank, Ratan Tata, Hyundai Motor Company, Kia Motors, Sachin Bansal and others. Ola had set up an ARK Ola Pre IPO Fund, which appears to be a special purpose vehicle that will support its IPO plans. The company was expected to churn out profits for the financial year ending March 31, 2019, but that wasn’t the case.

According to the company filings with the Ministry of Corporate Affairs, Ola’s parent posted a loss of INR 2592.93 Cr on a consolidated level. On a positive note, this is an improvement of 8% from the loss of INR 2842.26 Cr in FY18.

Sources close to Ola had earlier told Inc42 that the company is optimistic about cutting down losses further and aims to go public in the next 18-24 months. For this, the company is looking to lay off around 7-8% of its 4500+ employees, the source told us. Further, many more employees will be transitioned to other parts of Ola’s empire — Ola Electric, Ola Foods, Ola Financial Services etc, the source added.

ESOP: The Market Essentials For Retention

Employees generate value for startups. This value generation leads to the valuation of the company raising – the stock price rising. ESOPs allow an employee at a startup to become a bigger part of the success of the company. Founders and investors share the wealth that the company creates with employees through ESOPs.

Recently many startups have given ESOPs to their employees in order to retain talent and incentivise financially. This week itself, 20 employees of Meesho have sold 30% of their stock worth $1 Mn to the social ecommerce platform’s largest investor Naspers.

Also, CarDekho is offering employees to cash out 50% of their vested options under ESOP exercise and secondary sale plan. According to CarDekho, the cash-out is estimated to be worth $3.5 Mn.

The ESOP benefit is expected to further get a boost as in the Union Budget 2020, the government proposed to ease on tax burden for ESOPs.

The tax relaxation will be available for five years or till the time the employees leave the company or sell their shares, whichever is earliest. Moreover, Sitharaman has also proposed a 100% deduction of profits for three consecutive assessment years for a period of seven years. Whereas big players in the startup ecosystem can avail such deduction within 10 years if they have a turnover of INR 100 Cr.