The Swiggy IPO will unlock ₹9,000 crore worth of employee stock option plans (ESOPs), turning nearly 500 of its employees into ‘crorepatis’ after its listing on Wednesday, November 13, according to an Economic Times report.
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What are ESOPs?
ESOPs are a method of compensating employees for their work by giving them the option of getting company shares instead of a salary, although in some cases, it can be a mix of salary and shares which the employee can choose to either hold or sell to get cash.
A stock option in itself is a contract where the employee can choose to exercise it and get a determined number of shares at a determined time period.
ESOPs are a way of encouraging employee performance. The company’s share price is directly impacted by its financial performance. So, the better the company does, the more valuable their shares become.
In total, around 5,000 Swiggy employees, current and former, who were given these options are expected to gain significantly from the Bengaluru-based food delivery giant’s listing.
The company’s total ESOP pool is ₹9,000 crore, and the per-share price is ₹390, which also happens to be the upper price band of its IPO.
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However, according to the report, employees can sell their shares after a month from the listing compared to the general one-year lock-in period because Swiggy secured an exemption from market regulator Securities and Exchange Board of India (Sebi).
Meanwhile, Gurugram-based and already listed rival Zomato made 18 millionaires (measured in dollars) through its July 2021 ₹9,375 crore IPO.
However, according to the report, Swiggy’s ₹11,300-crore-IPO was the biggest public offering by a technology firm since Paytm’s public issue in 2021. The IPO was subscribed 3.59 times primarily by institutional investors.
Regarding wealth creation through ESOPs, Flipkart has been one of the biggest, having made ESOP buybacks adding up to $1.5 billion over the years. Similarly, Paytm’s November 2021 IPO made 359 crorepatis.
According to the report, Swiggy launched three ESOP plans in 2015, 2021, and 2024, each with almost 230 million shares. The report added that 9 million options out of these have been exercised into shares.
According to the report, the founders and top management were granted Esops worth nearly ₹2,600 crore, including founder and group CEO Sriharsha Majety, cofounders Nandan Reddy and Phani Kishan Addepalli, chief financial officer Rahul Bothra, chief technology officer Madhusudhan Rao, food marketplace CEO Rohit Kapoor, and newly appointed CEO of Swiggy Instamart Amitesh Jha.
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