Al­most All Em­ploy­ees Given Stock Op­tions

The Economic Times - - Econ­omy -

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.

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