With Swiggy's IPO, 5,000 Employees will have Access to INR 9,000 Core in Esop

Nitin Konde, Varun Bhardwaj

Nov 14, 2024 — 2 min read

Swiggy’s IPO Unlocks INR 9,000 Crore ESOPs for 5,000 Employees

On November 13, 2024, Swiggy went public on the NSE at a price of INR 420, 7.69% higher than its IPO price of INR 390. At INR 412 on the BSE, it made its debut at a premium of 5.64%.

According to various published reports, the company's listing is set to open up employee stock option plans worth INR 9,000 crore and propel the meal delivery company's approximately 500 employees into the "crorepati" league. One of the biggest wealth-creation initiatives in India's startup sector is expected to benefit 5,000 present and past employees of the Bengaluru-based company.

At a price of INR 390 per share, the highest price range of its initial public offering (IPO), which opened for subscriptions on November 6, Swiggy's whole Esop pool is estimated to be INR 9,000 crore. Through the buyback of Esops in July of this year, the company has already provided its employees with cash totalling more than INR 500 crore.

Exemption from Lock-In

Swiggy obtained a one-year lock-in period exemption from the Securities and Exchange Board of India (Sebi) in July of this year. This exemption would also enable Swiggy's employees to sell shares one month following the initial public offering (IPO), increasing their opportunities to build wealth. Over the years, e-commerce giant Flipkart, one of the largest wealth producers in the online economy, has carried out $1.5 billion in Esop buybacks in multiple tranches.

With its INR 9,375 crore IPO in July 2021, Swiggy's fiercest rival Zomato, one of the first major domestic consumer internet businesses to go public, created 18 millionaires. About 350 employees, both current and past, became crorepatis at the time of Paytm's first public offering (IPO) in November 2021. The main factor driving the 3.59 subscriptions to Swiggy's public offering was institutional investors' interest. For the IPO, the company had specified a price range of INR 371-390 per share.

Esop is Getting More Popular Among Indian Startups

Consumer internet companies are particularly affected by the Esop allocation tendency, which was first made well-known by IT services giants like Infosys. Before going public, these companies usually provide founders and top management with more stock options as incentives. However, as Swiggy has shown, the chance to create income for a larger group of workers can have a number of unintended consequences. Many of the recently graduated "crorepatis" frequently decide to launch their businesses alone. Spending on assets like real estate has also increased.

According to media reports, Swiggy has teamed up with several platforms to finance its employees' conversion from Esop to stock; this is especially true since they will need to pay taxes before the stocks can be sold on the open market. Employee taxes will be charged to the difference between Swiggy's current share price and the price at which the Esops were given at the conversion of the Esops.