Gaining Currency

Companies of all hues, including old warhorses, are now betting on stock options to ensure employee loyalty

- P.B. Jayakumar

SHYAM KUMAR SINGH lived in a single room tenement in Mumbai when life took a turn that seemed to be straight out of a Bollywood script, and he struck it rich. A poor migrant from Uttar Pradesh, Singh was an office boy, and the first employee of CitrusPay, which began operations in 2011. 

In September 2016, he got a windfall payment of ₹50 lakh, when South African online payments company PayU acquired CitrusPay for ₹860 crore. Singh’s returns on his Employee Stock Option Plan (ESOP) were part of the ₹43 crore paid to 50 employees who cashed in their stock option compensation. At least 15 employees were rewarded with over ₹1 crore each.

In January this year, Paytm sold shares to Canada-based VC firm Discovery Capital in a secondary sale, valuing the firm at $10 billion. That deal helped some 300 former and existing Paytm employees become millionaires. About 20-25 people reportedly made over $1 million each (about ₹6-7 crore) from the deal. If the recently announced $16 billion acquisition of online retailer Flipkart by US retail giant Walmart sails through, present and previous Flipkart employees are set to benefit by at least $500 million by exercising their ESOP options. A year ago, Flipkart had repurchased ESOPs worth $100 million from over 3,000 present and past employees, including Myntra and Jabong.

The charm of ESOPs is back after a lull of 3-4 years and employees are showing renewed interest in ESOPs. If ESOPs were an option for most IT firms and to some extent in sectors like pharma, FMCG or banking to retain key talent, now ESOPs have become the main option for companies across sectors – from new generation e-commerce and technology based companies like cab aggregators to insurance companies that are struggling to get adequate cash liquidity in business - to attract talent, loyalty and retention, say experts.