Swiggy IPO: IPO-bound Swiggy grants $271 million Esops to founder Sriharsha Majety, top management

Food and grocery delivery company Swiggy that would soon launch its initial public offering (IPO) granted employee stock options worth $271 million to its founders and top management under its latest stock-based compensation plan rolled out in April this year, the company’s pre-listing prospectus showed.Nearly $200 million of this stock has been granted to the Bengaluru-based company’s founder and group chief executive officer, Sriharsha Majety. The rest was awarded to 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.

While Reddy is also the company’s head of innovation, Addepalli is Swiggy’s chief growth officer.

For Majety, who holds 6.23% stake in the company on a fully diluted basis, the additional Esops granted through the 2024 scheme could result in an additional stake of 2.2-2.5%. He will be selling stake worth $7.5 million through the IPO’s offer for sale (OFS) component.

Between July and September, Majety and Reddy sold shares of Swiggy through secondary transactions. While Majety offloaded a stake worth around $23 million, Reddy sold shares amounting to $12 million, ET had reported on September 27.

Jha, who joined Swiggy in September from ecommerce marketplace Flipkart, was granted options worth $13.3 million, while Kapoor, who has been with the company since August 2022, was awarded stock options worth $9.8 million under the latest Esop plan.

Swiggy had also granted stock options worth $5.7 million to Ashwath Swaminathan under the scheme. Swaminathan stepped down as the company’s chief growth and marketing officer effective September 30.To be sure, the stock options awarded to the company’s senior management – under the Esop 2024 scheme – have a vesting period of one to eight years from the date of grant. Any changes in the company’s stock price after the public listing could also result in valuation changes for the stock rewards offered.

Companies typically grant additional stock options to founders and senior management as incentives to perform before they go public. This trend is especially prevalent in consumer internet firms where founders see heavy dilution of their stakes over various fundraising rounds.

The development was first reported by online news publication The Arc.

Swiggy has made regulatory filings for its $1.25-billion IPO with the Securities and Exchange Board of India (Sebi) in April under the regulator’s confidential filing route. It filed an updated draft prospectus in September after receiving approval from Sebi.

The fresh issue component of the offering, sized at $450 million initially, could however, be expanded to $600 million. Besides Majety and Reddy, top Swiggy investors to participate in the OFS component of the issue include the company’s biggest shareholder Prosus, Norwest Venture Partners, Elevation Capital, Accel, Coatue and Alpha Wave Global.

In 2021, Swiggy’s chief rival Zomato awarded its founder and CEO Deepinder Goyal with stock-based compensation worth nearly $376 million at the time. As of June 30, Goyal held a 4.2% stake in Zomato worth over $1.2 billion.

Similarly, Paytm parent One 97 Communications had also granted Esops to its founder and CEO Vijay Shekhar Sharma back in 2021 prior to the fintech company’s IPO. However, these grants reportedly came under the scanner of the markets regulator Sebi earlier this year.

Other tech startups, such as Freshworks, Delhivery and PB Fintech, have also granted stock-based awards to their founders and top management prior to their IPOs in 2021 and 2022. These executives include Freshworks founder and now former CEO Girish Mathrubootham, Delhivery founder and CEO Sahil Barua, and PB Fintech founders Yashish Dahiya and Alok Bansal.