All about Swiggy’s $65m ESOP plan

Swiggy, the popular food delivery and quick commerce platform, has announced a $65 million ESOP buyback program, marking its fifth such initiative since 2018. This move comes ahead of the company's highly anticipated Initial Public Offering (IPO), which is expected in the near future. If you are looking forward to your IPO investment in Swiggy, look out for such news.

What are ESOPs and ESOP buybacks?

An Employee Stock Ownership Plan (ESOP) is a company-sponsored benefit that allows employees to purchase company stock at a discounted price. When a company conducts an ESOP buyback, it essentially repurchases these shares from its employees, providing them with liquidity and financial gains.

Why is Swiggy offering ESOPs liquidity?

• Employee Retention and Morale: ESOP buybacks are a powerful tool for retaining top talent and boosting employee morale. By providing an opportunity to monetize their stock options, Swiggy aims to incentivize its employees and strengthen their commitment to the company.
• Pre-IPO Liquidity: Before an IPO, employees with vested stock options often face a liquidity crunch. ESOP buybacks address this issue by allowing employees to sell their shares back to the company, providing them with much-needed cash.
• Valuation Expectations: The valuation at which Swiggy is conducting this buyback – around $9 billion – is lower than its last fundraise valuation of $10.7 billion. This could indicate the company's cautious approach to valuation ahead of its IPO.

Impact of the Swiggy ESOP buyback

Swiggy's decision to conduct a $65 million ESOP buyback is likely to have the following implications:

• Employee Benefits: Over 3,200 employees will stand to benefit from this buyback, providing them with a significant financial boost.
• Company Image: The move showcases Swiggy's commitment to employee welfare and its recognition of the employees' contribution to the company's success.
• IPO Readiness: By addressing employee liquidity concerns, Swiggy is positioning itself favourably for its upcoming IPO, as it demonstrates a focus on employee satisfaction and retention.

The broader picture

Swiggy joins a growing list of startups, including Meesho, Purplle, Urban Company, and Flipkart, that have conducted ESOP buybacks in recent times. This trend reflects the increasing importance of employee ownership and the role of ESOPs in attracting and retaining talent in the startup ecosystem.

Conclusion

Swiggy's $65 million ESOP buyback is a strategic move that benefits both the company and its employees. By providing liquidity to its workforce and boosting employee morale, Swiggy is setting a positive precedent for other startups. As the company gears up for its IPO, this move is likely to enhance its attractiveness to potential investors.