CaratLane employees poised to strike gold after sale to Titan; to net Rs 340-380 crore from ESOPs

CaratLane employees will receive Rs 340 crore-Rs 380 crore in employee stock ownership plan (ESOP) payouts as Titan sets the stage to acquire the remaining stake in the jewellery startup.

CaratLane has around 1,500 employees in total, of which a majority are on the retail and manufacturing side of the business and don’t have shares in the company. Instead, they are rewarded with bonuses and hikes only.

The remaining employees, about 400 of them, are part of the startup’s corporate team where giving ESOPs was a more common practice. Of the 400 employees, 75 of them have shares in CaratLane which are now worth Rs 340 crore -380 crore and account for about 1.72 percent in CaratLane.

Titan will be buying out those shares from CaratLane employees as the company intends to own 100 percent in the startup. It has already been increasing its stake. Titan currently holds 71.09 percent stake in CaratLane and is now preparing to buy another 27.18 percent stake from Sachetti and his family for Rs 4,621 crore, pushing its ownership in the jewellery startup to 98.28 percent. The deal is expected to close by October 31, 2023, subject to regulatory approvals.

For Titan to own 100 percent of CaratLane only the ESOP pool will then remain.

“The ESOP component (of 1.72 percent in the company) will also be bought out at the same time by the end of October. A bunch of it will be done by then and whatever remains, Titan will buy as and when the vesting happens,” Mithun Sachetti, co-founder and CEO of CaratLane told Moneycontrol.

The deal in a nutshell

ESOP cashouts have already led to $1.46 billion of wealth in the hands of startup employees since the beginning of 2021, according to data from Qapita.

Until a few years ago, ESOPs were not as attractive a proposition for startup employees, unless it was a blue-blooded company you were talking about, like Flipkart. Initially, startup employees were not quite sure if the options would turn into a real shareholding and then into money.

But a string of successful initial public offerings (IPOs) such as Zomato, Paytm, Delhivery and frequent ESOP liquidity events by much smaller startups has changed the narrative.