Swiggy IPO To Make Crorepatis: 500 Employees To Get Rs 1,00,00,000; What Are Employees Stock Options?

Swiggy IPO: The online food delivery company, Swiggy is likely to make hundreds of its employees crorepati under its Employees Stock Options Plan (ESOP). As per media reports, some 500 employees will likely earn Rs 1 crore, as Swiggy makes its market debut on Wednesday, November 13, 2024. Swiggy will be rivalling Zomato, the leader in food and quick delivery services.

As per a MoneyControl report, around 500 Swiggy employees are set to earn Rs 1 crore each when the firm makes its stock market debut on November 13. The report stated that the IPO is likely to hand out up to Rs 9,000 crore in the hands of 5,000 staffers who have stayed in the company for several years and contributed to scaling its business.

Of the 5,000 employees, 500 of them are likely to become crorepati under Swiggy's ESOP payout.

As per the red herring prospectus, Swiggy collectively has ESOP 2015, ESOP 2021 and ESOP 2024 schemes.

Earlier, in March 2024, Swiggy filed for an exemption application with Sebi seeking an exemption from the lock-in requirements under Regulation 17(a) of the SEBI ICDR Regulations with respect to the Equity Shares allotted to certain employees and former employees of the Company and its Subsidiaries pursuant to exercise of employee stock options under the ESOP Schemes, which were subsequently contributed to the Liquidity Trust, to inter alia improve the liquidity opportunities available to such Equity Shares and efficient management of Equity Shares and the respective number of shareholders through the Liquidity Trust.

In its RHP, Swiggy also said, "Our Company may, in the future, continue to issue Equity Shares, including under our ESOP Schemes, at prices that may be lower than the Offer Price, subject to compliance with applicable law. Grants of stock options result in a charge to our statement of profit and loss and affect our financial condition."

It added, "Any issuances of Equity Shares by our Company, including through the exercise of employee stock options under the ESOP Schemes or any stock option plans that we may implement in the future, may dilute your shareholding in the Company, thereby adversely affecting the trading price of the Equity Shares."

It needs to be noted that Flipkart earlier had let out a similar ESOP to the tune of Rs 11,600-12,500 crore for its current and former employees.

What Are ESOPS?

As per Religare Broking, an ESOP is an employee benefit plan that allows employees to become company shareholders. It fosters a sense of ownership and alignment with the company's success. Under this plan, employees are granted shares of company stock, either through direct purchase or as part of their compensation package.

The purpose of an employee stock ownership plan in the corporate structure is twofold. Firstly, it provides employees with a financial stake in the company's performance, giving them a vested interest in its success. This can motivate employees to work harder and contribute to the company's growth and profitability.

Benefits of ESOP As Per Religare Broking Are:

One significant advantage is the increased employee loyalty resulting from company ownership. When employees have a stake in the organisation's success, they are more motivated to contribute their best efforts and take pride in their work. This can lead to higher productivity and overall company performance.

From a tax perspective, it can provide significant advantages. Contributions made are tax-deductible for the employer, helping to reduce their tax liability. For employees, the stock received through such plans is not taxed until it is sold, allowing for potential tax savings.

Furthermore, studies have shown that companies with employee stock ownership plans tend to outperform their counterparts. By involving employees in ownership, it creates a culture of shared responsibility and collaboration, fostering a sense of commitment among workers. This can result in improved company performance, innovation, and competitiveness in the market.