Paytm Expands ESOP Scheme To $604 Mn, Largest Among Indian Startups

Indian financial services giant Paytm has added 242,904 stock options taking its existing ESOP (employees stock option plan) pool to 2.4 Mn equity options, the company announced. 

With this addition, the company’s ESOP pool valuation has jumped to $604 Mn, making it one of the largest among Indian startups. 

The expansion takes the startup’s ESOP pool to a pool of 24.09 lakh equity options of INR 10 each from 21.67 lakh equity options previously. Last week, Inc42 was the first to report that the company’s board also passed a special resolution through a proposal to expand the existing ESOP pool to 24.09 lakh equity options of INR 10 each from 21.67 lakh equity options.

India’s highest valued unicorn ($16 Bn), Paytm recorded 1.2 Bn monthly transactions in February 2021 across its unified payments interface (UPI), wallet, cards and netbanking payment methods. 

The company plans to award the expanded stock options to more employees during its annual performance appraisal. To attract and retain talented professionals, Paytm last year amended certain aspects of its ESOP policy and decided to reward high-performing employees and new hires with ESOPs worth INR 250 Cr in April 2020. 

To reward performance and create a meritocratic organisation, it introduced performance-based ESOPs that are offered at the time of hiring or during the appraisal cycle. Applicable to all key roles across different levels ESOPs are linked to individual goals and are reviewed / approved by the business heads with flexible terms.

A Paytm spokesperson said, “We consider our ESOP scheme as a great way to promote the spirit of wealth creation among employees & truly believe that every employee is a stakeholder in the company. Our ESOP policy rewards colleagues on the basis of their overall performance and achievements.”

Why ESOPs Matter

Last year, ride-hailing company Ola expanded its ESOPs pool by adding $46 Mn (INR 326.45 Cr) with a further issue of 1,536,230 equity shares. Over the past year companies like Vogo, Innoviti and Sharechat among others have increased their ESOPs pool.

This time last year, startups turned to ESOPs as a way to mitigate the salary costs and keep employees motivated. ESOPs were seen as a talent retention strategy given that companies had to tighten their purses for salaries. 

Primarily, employees choose ESOPs in a startup to be a part of the future success of the company. The wealth creation for employees through ESOPs buybacks signals goodwill and positivity around the business.

Startups such as Razorpay, CRED, Urban Company have in recent months expanded their ESOPs pool in recent times. On March 4, payments gateway major Razorpay, announced that its existing investors Sequoia Capital and Singapore’s GIC were buying back shares worth $10 Mn (INR 73 Cr) from its workforce under the ESOPs program. About 750 former and current employees at the fintech unicorn were eligible to sell 33% of their allocated ESOP shares in this exercise. This is the third time that Razorpay has carried out a buyback exercise.The average size of this sale among the staff is in the range of INR 11 Lakh – INR 15 Lakh per person, though it will differ for each employee.

Last week, Bengaluru-based manufacturing services platform Zetwerk bought back shares worth $8.3 Mn (INR 60.92 Cr) from employees and early-stage investors, a month after raising funds from VC investors. The company has claimed that a large part of its workforce has participated in this employee stock options (ESOPs) liquidation process in three rounds.

Coming back to Paytm, with over 20 Mn merchant partners on board, the company claims to maintain the highest market share in offline payments and continues to register 15% M-o-M growth. Paytm’s array of services include Paytm Payments Bank, Paytm Payments Gateway, Paytm Payout, wealth management, insurance, credit cards as well as utility bill payments, offline merchant payments, content and gaming services.