With a pool of Rs 17,000 crore, Flipkart tops the Indian tech Esops list

Flipkart, a Walmart-owned ecommerce platform, has amassed Rs 17,000 crore Employee Stock Ownership Plan (Esop) pool, propelling it to the top of the list of Indian technology companies that have granted stock options to employees.

According to data obtained from executive recruitment agency Longhouse Consulting, the domestic e-tailer was followed by Oyo, Zomato, Paytm, and Nykaa.

More companies executed buyback programmes, rewarding staff, making it a record year for Esops across Indian startups.

Between July 2020 and November this year, around 40 Indian firms bought back Esops valued Rs 3,200 crore.

Following their initial public offerings on Indian exchanges earlier this year, consumer tech companies Zomato and Nykaa delivered a bonanza for investors and employees. They've had the industry's largest Esop pools.

According to sources, Zomato's stock market launch generated 18 dollar billionaires.

ShareChat, a regional language social media platform that joined the unicorn club in April, raised Rs 462 crore in the Esop pool.

Despite the potential for wealth creation that larger Esop pools offer, some experts say that taxation at the time of exercising the options, rare liquidity programmes, and extended vesting timelines are among the key problems that employees confront.

According to Pallavi Nautiyal, regional head of Qapita, an equity management platform, vesting dates typically do not match the rate of business growth, as businesses become unicorns in months.

“When employees exercise their stocks, they have to pay taxes immediately on the notional gains,” says Abhishek Goyal, cofounder of data platform Tracxn.

“So far in India, employees were always looking for fixed salary as per market benchmarks and Esops were usually a cherry on top,” Goyal said. “Now that many people have seen their Esops being cashed out, there will be an increasing trend where people would accept lower fixed salaries against higher Esop components, and this trend further aggravates the need to bring policy around Esops and in some ways also checks bad behaviour.”