Deepinder Goyal’s ESOPs cost Zomato Rs 143 crore in second half of FY23

Deepinder Goyal, co-founder of Gurugram-based Zomato.

Employee stock options (ESOPs) given to Zomato co-founder and CEO Deepinder Goyal cost the company Rs 143 crore in the second half of FY23 even as the company is trying to convince public market investors of imminent profitability, related party transaction filings by the company on the exchanges showed.

Meanwhile, the cumulative ESOP cost on account of such rewards to three key managerial personnel (KMPs) of the company was Rs 156 crore during the period — with the allotments to chief financial officer Akshant Goyal and company secretary Sandhya Sethia costing Rs 13.5 crore and Rs 10 lakh of the total amount, respectively.

The company’s filings also showed that expenses on account of Deepinder Goyal’s share-based payments amounted to 67.5 percent of the company’s total ESOP cost of Rs 212 crore in the first half of FY23. Similarly, the KMPs cumulatively accounted for 74 percent of the total ESOP charges — which means that share-based payments for all other employees was just 26 percent of the total or Rs 55 crore.

Meanwhile, Zomato said in a shareholder letter last week that it incurred ESOP costs worth Rs 510 crore in FY23, compared to Rs 880 crore in FY22.

For context, the cumulative ESOP cost on account of such rewards to three key managerial personnel (KMPs) of the company was Rs 779 crore in all of FY22. Of this entire amount, the cost incurred by the company due to the CEO's stock remuneration stood at Rs 753 crore, according to Zomato's annual report for FY22.

However, the filings also showed that both the CEO and CFO have waived off their cash compensation in both FY22 and FY23.

Last year, Deepinder Goyal told employees in an internal note that he would be giving away around Rs 700 crore of his ESOP proceeds in FY22 to the Zomato Future Foundation. The money would be used towards the education of delivery partners’ children.

To an analyst query on whether ESOP costs can be expected to be on a down-trend on a quarter-to-quarter basis going forward, the company management said that it might go up or down due to various factors.

A senior executive said during the analyst call that although the spate of recent high-profile exits from the company such as those of New Initiatives Head Rahul Ganjoo and co-founder Mohit Gupta would have some effect on the ESOP charges, the impact won’t be formidable.

Zomato has said that it had turned adjusted EBITDA positive in the March quarter, excluding quick commerce business Blinkit. The timing is important to note, as it came just a day after its rival Swiggy also declared that its food delivery business was also operationally profitable as of March, but excluding employee stock option (ESOP) expenses.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation) is a measure of operational profitability used by new-age companies. It doesn’t include some fixed costs like share-based payment expenses in the calculation.

In its letter to shareholders last week, Zomato said its next goal was to get to full profitability in the next four quarters, or by March 2024. That would include even Blinkit-related expenses.

On May 19, Zomato reported that its consolidated net loss in Q4FY23 narrowed to Rs 188.2 crore from Rs 359.7 crore that it reported in the same quarter last year. In the quarter gone by, its revenues from operations jumped 70 percent to Rs 2,056 crore, from Rs 1,211.8 crore in the corresponding quarter a year ago.

Zomato saw the gross order value of its food delivery business shrink about 1 percent to Rs 6,569 crore in the March quarter due to an industry-wide slowdown and its exit from 225 cities in the previous quarter.

Several experts have been critical of the ESOP policies of startups like Zomato, Delhivery Paytm and Policybazaar which were listed on the bourses in 2021. While the companies remain loss-making, the founders and top executives of these companies have been rewarded with large ESOP grants.