Info Edge is not in a ‘tearing hurry’ to sell its stakes in Zomato and Policybazaar, although the board will periodically review the matter, the company’s founder Sanjeev Bikhchandani said in an earnings call on August 12.
“If we exit our stakes in the two companies and look to deploy all that cash in other early-stage start-ups, there is a possibility that we will end up making sub-optimal investments,” said Bikhchandani.
“Typically, a fund has to write all its first cheques three years before the close of the fund. Suppose we were to deploy Rs 10,000 crore from the two exits. That would mean investing in 300 early-stage companies at an average cheque size of Rs 10 crore,” Bikhchandani explained.
Info Edge sold shares worth Rs 357 crore in Zomato’s initial public offering (IPO) and retained a 15.3 percent stake in the company. However, it did not sell any of its shares in the IPO of Policybazaar parent PB Fintech and holds a 13.3 percent stake in the company.
“If you sell the stake, then you have only 1X of the money. Whereas if you hold on to the stake, the money might multiply in the future. My view is if a business has legs, why not hold on to it for a while? However, nothing is etched in stone and ultimately the board decides on such matters,” maintained Bikhchandani.
With the anchor lock-in of Zomato having ended on July 23, pre-IPO shareholders in the company such as Tiger Global, Moore, and Uber have sold off large amounts of shares in the company in the past few weeks.
This, in addition to the food delivery major’s Rs 4,447 crore acquisition of quick commerce company Blinkit, led to downward pressure on the company’s stock price. The company’s shares were trading at Rs 61.75 apiece on the BSE at the close of market hours on Friday, down 19 percent from its IPO price of Rs 76 apiece.
The ESOP question
The Naukri founder was also quizzed about his views on recently-listed tech companies allotting a large number of employee stock options (ESOPs) to the founders, which in turn have hurt the profitability of such companies.
“I think it is important to look at each case separately and look at a few things. First, was there disclosure of the ESOPs prior to IPO? The second thing is if founders have been forced to dilute too much of their shareholding, will they have (enough incentive for) 5-7 years to run the ship” he said.
“If the dilution was a result of competitive raising, there could be a more sympathetic view… maybe some amount (of ESOPs to founders) is justified… such as 1-3 percent of the company. We also need to see whether the founder took the decision himself or executive directors were on board in the process,” Bikhchandani added.
Moneycontrol reported earlier that ESOPs given to Zomato co-founder and CEO Deepinder Goyal cost the company Rs 387 crore in the second half of FY22. Meanwhile, 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.Info Edge’s consolidated revenue grew 66 percent to Rs 547 crore in Q1 whereas net profit rose 85 percent to Rs 292 crore, compared to the year-ago period. Its shares rose 0.31 percent to close at Rs 4,431 apiece on the BSE on Friday.