Almost All Employees Given Stock Options
However, it is not just the top executives who will benefit. Almost all the 500-600 employees in core functions like technology and marketing, apart from the call centre and delivery staff, have received stock options. This is in contrast to what has so far been the norm in India’s startup sector, where it is the founders who have benefitted the most from sparse exits. “Employees are the least represented at the deal table,” said Alok Goel, the former COO of online ticketing firm redBus, which was acquired by South Africa’s Naspers last year. Goel, who is now the chief executive of Freecharge, an online recharge site, said startups set aside a stock pool, but do not distribute it. “At Free- charge, we have set aside a healthy stock pool and have already distributed a large chunk of it,” said Goel. Flipkart and Myntra will function as separate entities under a new holding company that is due to be announced on Thursday. Employees can convert their entire stock option or the part they are not diluting into shares in the holding company. “The value of the stock is only going to go up and when an IPO happens, these executives can cash out at a very high premium,” said the same person, who did not wish to be named. Flipkart, which is expected to launch a public offering, most likely on the Nasdaq next year, also provides stock options to employees but these are linked to designation and performance.
About two and a half years ago, it opted to raise salaries and reduce stock components. “Fewer employees have stock in the company,” said a recruitment consultant who has worked with the company.
Naukri and MakeMyTrip are regarded as startups that shared their wealth with employees in the form of stock options. About 70% of employees at MakeMyTrip have ESOPs.
This is the case typically in India unlike in more developed startup ecosystems like the Silicon Valley. For instance, $3 billion (over Rs 17,000 crore) of the $19 billion (over Rs 1 lakh crore) that WhatsApp got from Facebook was in the form of stock grants that will vest over the next four years for the 55 WhatsApp employees.
The best-known Indian company for creating wealth for a large number of employees is Infosys. Since 1994, the Bangalore-headquartered company has had three ESOP plans that covered 32,000 employees. Many hundreds of employees, including the chauffeur and executive assistant of Infosys executive chairman NR Narayana Murthy, became rupee millionaires.
“Myntra’s is a good model for other startups and entrepreneurs,” said Anshuman Das, managing partner at Longhouse Consulting, a recruitment firm that works with startups.