Zomato Grants Foodie Bay Employees' ESOP Trust 47.75 Cr in Equity Shares

Nitin Konde, Varun Bhardwaj

Dec 4, 2024 — 2 min read

Zomato Allots INR 47.75 Cr in Equity Shares to ESOP Trust

The Foodie Bay Employees ESOP Trust, an employee welfare trust established by the foodtech company, has received 47.75 Cr equity shares from Zomato under various employee stock option programmes (ESOPs). The Deepinder Goyal-led firm announced in an exchange statement on December 2, that its board had authorised the issuance and distribution of 47.75 Cr equity shares under the Zomato ESOP 2018, ESOP 2021, ESOP 2022, and ESOP 2024 schemes, each with a face value of INR 1.

The newly allocated shares are valued at INR 13,489.3 Cr (about $1.60 Bn) based on the stock's most recent close. According to the filing, the company's issued, subscribed, and paid-up equity share capital grew from INR 917.28 Cr to INR 965.03 Cr with the allocation of new equity shares to Foodie Bay Employees ESOP Trust.

Strengthening the Cash Balance to Remain Ahead in the Race

CEO Deepinder Goyal stated that Zomato needed to improve its cash balance because of the current competitive environment and the company's much larger scale. It is anticipated that Zomato's financial stability may suffer in the near future as a result of the growth of Blinkit, its rapid commerce division. This was made clear by Zomato's Q2 FY25 results, which showed a 30% sequential drop in net profit to INR 176 Cr for the foodtech company. This was mostly caused by higher costs associated with Blinkit's expansion drive. Strong performance across its meal delivery and quick commerce sectors drove a 14% quarter-over-quarter increase in operating revenue to INR 4,799 Cr in Q2 FY24.

ESOP Getting More Popular Among Startups

As part of their initiatives to reward staff, several modern internet businesses have issued ESOPs this year, including Delhivery, Nykaa, ixigo, and ideaForge, among others. The travel tech business ixigo gave 17.57 lakh stock options last month, while logistics giant Delhivery increased its ESOP pool by allocating 73K stock options. Only a few days after raising INR 8,500 Cr through the placement of eligible institutions—its first significant fundraising effort since its 2021 IPO—Zomato announced its ESOP.

Furthermore, the median ESOP pool size grew from 9% in 2021 to 12.6% in 2024, and 90% of founders now talk about ESOPs with candidates during interviews or job offers, up from 75% in 2021. Additionally, the reasons for providing ESOPs have changed; in 2024, 40% of founders cited cost reductions, up from 28% in 2021. The founders cited the necessity to retain people as the second most important reason for putting these plans into action, behind creating a sense of ownership and company culture.

Even with this increase, fewer than 30% of founders still fully understand the complexity of ESOPs, a percentage that hasn't changed since 2021. Just 14% of founders felt educated about the tax consequences of ESOPs, which is a fairly low level of understanding.