ESOP Trends at Zomato, Paytm, Nykaa, Urban Company and more in May 2024
Welcome back to the latest edition of Fables of ESOPs. While we witnessed a major slump in ESOP trends last month, May sets the right trajectory for a renewed growth journey, with major companies coming to the fore to announce fresh ESOP allotments. May witnessed major companies like Nykaa, Ashok Leyland, Zomato, and more announcing fresh allotments while Urban Company announced its 5th ESOP Liquidity Buyback.
Let’s dive right into the details:
Nykaa issued new 4.05 lakh ESOPs ahead of Q4 results
FSN e-Commerce Ventures, the company behind the beauty and fashion retail brand Nykaa, has allocated approximately 405,000 equity shares under its employee stock option plan (ESOP) just before announcing its results for the January-March quarter (Q4FY24). Based on the company's closing price on May 21, these newly issued shares are valued at Rs 7.1 crore.
Notably, over the past three months, Nykaa's shares have risen by more than 16 percent, significantly outperforming the Nifty 50 index, which increased by only one percent during the same timeframe, a positive trend that could have led to this increased ESOP allotment.
Ashok Leyland allots 1 lakh equity shares under ESOP
Ashok Leyland has issued 100,000 equity shares under its ESOP on May 23, 2024. With this allotment, the company's paid-up equity share capital stands at Rs. 293,64,27,276, consisting of 293,64,27,276 equity shares of Re. 1 each.
Before this, Ashok Leyland allotted 2,00,000 equity shares under ESOP on 28 February 2024, after which, the paid-up equity share capital of the Company stood at Rs.293,63,27,276/- divided into 293,63,27,276 equity shares of Re.1/- each.
Zomato announces new ESOP Plan comprising 18.26 crore shares
Zomato plans to establish a new employee stock option plan (ESOP) comprising 18.26 crore shares valued at Rs 3,500 crore. This new ESOP pool will serve the company's needs for the next five years. According to a regulatory filing, Zomato will allocate 18.26 crore shares to its employees under ESOP 2024. At the close of the market, Zomato's share price stood at Rs 193.7.
As part of its fourth-quarter results announcement, Zomato's management revealed the plan to introduce this additional ESOP. The company has also sought shareholder approval for the creation of this ESOP, which represents 2 percent of the firm’s outstanding share capital on a fully diluted basis.
The company also stated that it will maintain the previous ESOP format, with the strike price set at face value. Vesting will be based on time and performance conditions, with further details to be provided in the postal ballot notice for shareholders’ approval.
Additionally, the total ESOP charge for the fourth quarter of the financial year 2024 was Rs 161 crore, up from Rs 122 crore in the third quarter of the same financial year.
Delhivery Expands ESOP Pool With 75,000 new Stock Options for Employees
Logistics major Delhivery announced the allocation of 75,000 stock options under its Employee Stock Option Plan (ESOP) 2012. The unicorn stated that these options will vest over three years from the grant date. Specifically, 20% of the newly granted ESOPs will vest after 12 months, 30% will vest within 24 months, and the remaining 50% will vest over 36 months.
The Gurugram-based startup has set the exercise price for the stock options under the ESOP 2012 scheme at INR 1 per share. In its filing, the company also mentioned that the equity shares allotted upon exercise of the options will not be subject to a lock-in period.
Tata Motors allots 2.39 lakh equity shares under ESOP
Tata Motors allotted 239,911 equity shares under its ESOP. Following this allotment, the company's paid-up Ordinary share capital increased from Rs 6,647,955,507, consisting of 3,32,37,39,001 Ordinary Shares of ₹2 each, to Rs 6,648,435,329, consisting of 3,32,39,78,912 Ordinary Shares of ₹2 each (accounting for subscribed share capital, forfeited shares, and less calls in arrears).
ICICI Bank approves fresh 6.5 lakh shares under ESOP
ICICI Bank has allotted 6.5 lakh equity shares with a face value of Rs 2 each under its employee stock option plan. Previously, on January 11, 2024, ICICI Bank had allotted 1.67 lakh equity shares under the ESOP. Following this announcement, ICICI Bank's shares declined by over 1 percent, reaching Rs 1,108 per share.
Shadowfax allots fresh ESOPs worth $7.3 Mn
Logistics company Shadowfax has introduced new ESOPs worth $7.3 Mn (approximately 61 Crore) under its existing ESOP 2016 plan.
According to a regulatory filing accessed from the Registrar of Companies, the board has approved an amendment to the Employee Stock Option Plan 2016, adding 20,229 fresh stock options for the company, its subsidiaries, and associate entities. The total ESOP Plan is estimated to be worth around Rs 264 crore, comprising 86,033 employee stock options.
This update follows Shadowfax’s $100 million Series E funding round led by TPG NewQuest a few months ago.
Paytm’s ESOPs Costs More than its Net Loss
The company's financial statements reveal that despite posting a net loss of Rs 1,423 crore, the cost of its employee stock options (ESOP) increased slightly to Rs 1,466 crore for the fiscal year. In FY23, the ESOP cost was Rs 1,456 crore, with a net loss of Rs 1,777 crore, which was not the case.
Paytm's regulatory filings also disclosed projected ESOP costs of Rs 1,174 crore for FY25, Rs 558 crore for FY26, and Rs 225 crore for FY27. These projections assume that all granted ESOPs will vest and that no new ESOPs will be issued in the coming years.
In recent years, companies like Paytm, Zomato, and Delhivery have faced significant criticism for awarding large ESOPs to their top executives before their initial public offerings (IPOs), which has negatively impacted their profitability outlook.
Urban Company announces ESOP Liquidity Program worth Rs 203 Cr for 446 employees
Urban Company, a home service marketplace, has announced its largest employee stock buyback, amounting to Rs 203 crore (nearly $25 million). According to the company's press release, this marks the fifth ESOP buyback, with 446 employees participating.
Dharana Capital, a branch of existing investor Vy Capital, along with existing investors Vy Capital and Prosus, will purchase these shares from former and current staff members.
Urban Company stated that the employees benefiting from this sale range in age from 23 to 56 years old, with 28% of the beneficiaries being women. To date, Urban Company has granted ESOPs to 1,593 employees, with approximately 784 of them participating in five buybacks, liquidating ESOPs valued at Rs 306 crore ($37 million).
Conclusion
May 2024 has been a dynamic month for ESOP announcements across several major companies, indicating a renewed commitment to employee retention and motivation through stock options.
However, the significant ESOP costs, as seen with Paytm, underscore the financial impact such plans can have, particularly when issued in large volumes. Despite the criticisms faced by some companies regarding pre-IPO ESOP allocations, the overall trend reflects a robust approach towards fostering long-term employee engagement and satisfaction.
As we move forward, it will be interesting to observe how these strategies impact the companies' performance and employee morale, setting a precedent for other firms in the industry. Stay tuned for more updates and insights in the next edition of Fables of ESOPs.
