In what could be the largest share buyback plan in the Indian startup sector, the board of India’s largest e-commerce venture Flipkart has approved a plan to repurchase employee stock options (ESOP) worth about $100 million, a financial daily reported.
The plan will benefit about 6,000 current and former employees and is the biggest opportunity so far for them to liquidate their holdings in Flipkart, The Economic Times reported, citing two people familiar with the matter.
"The overall corpus reserved for buyback of shares from employees is over $100 million," one of the people mentioned above was quoted as telling ET.
Employees of Flipkart’s marketplace platform and its subsidiaries such as online fashion arm Myntra and payments app PhonePe are also included in the plan. The repurchase programme will be closed by December, ET stated.
E-commerce companies often offer ESOPs to employees in a bid to attract and retain talent. The ESOPs could make up as much as 70% of the compensation package for top-level executives.
The programme comes after Flipkart raised a mammoth $2.4 billion (Rs 15,300 crore) from SoftBank’s $93-billion Vision Fund in August this year. In April, the firm secured $1.4 billion (Rs 9,000 crore) from Chinese Internet giant Tencent Holdings Ltd, US online retailer eBay, and software giant Microsoft Corp. As part of this investment round, it had also acquired eBay’s India operations. Following the August investment, Flipkart said that it has more than $4 billion cash on its balance sheet. However, the funding round saw Flipkart’s valuation fall to $11.6 billion from its $15.2-billion peak valuation in 2015.
After the investment round in April, Flipkart said it will offer differential stock options to all eligible employees, including those from Myntra and PhonePe, to protect them from the drop in its share price.
In September last year, Mint reported that nearly 35-40% of Flipkart’s 10,000-odd employees would receive stock options, compared with 10-20% the previous year. The development came after Flipkart reportedly changed its variable pay structure for mid- to senior-level employees wherein 40% of the cash component would be offered as stock options. The change was instituted to reduce spending on salaries, which is one of the largest expenses for the firm.
In November 2015, Flipkart has sold a marginal stake worth between Rs 180 crore and Rs 240 crore ($28-36 million) from its employee stock option trust fund.