Swiggy rolls out 2-year ESOP liquidity program worth $35-40 million

Food delivery platform Swiggy on October 6 said its employees will be able to tender shares they hold in the company twice over the next two years, in a move to create more visibility and transparency around employee stock option plans (ESOPs).

Swiggy said all employees holding ESOPs will be eligible to participate in two liquidity events in 2022 and 2023, with the entire exercise worth $35-40 million, pegged to its current valuation of $5.5 billion. It did not specify the number of employees who benefit from the exercise.

Swiggy's move to reward employees comes amidst a recovery in its food delivery business, robust growth in its grocery delivery business Instamart and an unprecedented war for technology talent in India.

“As Swiggy grows, we want our team to grow with us and enjoy the fruits of their hard work and valuable contributions. This is an industry-first initiative whereby we are democratizing wealth creation by enabling all our ESOP holding employees to participate in our committed liquidity events in 2022 and 2023. More importantly, by giving them visibility on the ESOP liquidity, Swiggsters hold the option and flexibility to plan their cash flow and investments," Girish Menon, Head of HR, Swiggy, said in a statement.

The liquidity events, planned in July 2022 and July 2023, will be the third and fourth such instances for the company, after June 2018 and November 2020. On November 9, 2020, Swiggy commissioned its second liquidity program through a secondary sale, worth $7-$9 million. Swiggy recently also offered increments and promotions in the April-June quarter of FY22.

While the entire exercise will happen at a current valuation of $5.5 billion, employees will benefit from any potential value increase at the time of these liquidity events over the next two years. As reported earlier, Swiggy is in talks with investors to raise $500-$600 million at a valuation of over $10 billion, giving it the firepower to compete with Zomato, which was listed on the Indian markets recently. While Zomato has been heavily focussed on the food delivery business, Swiggy has also been expanding its instant grocery service, Instamart.

For years, ESOPs have been a rare source of wealth creation at startups due to lack of exits, but over the last year and a half, many firms have announced buybacks and also expanded the ESOP pool to cover more stakeholders, a move aimed at motivating employees and retaining them. While most ESOP liquidity events happen on funding or exit, Swiggy's move to create specific liquidity events in advance is a rare move.

While startups such as Razorpay, Zerodha, Cars24, Urban Company, Whatfix have announced ESOP buybacks recently, Unacademy unveiled stock options for educators. Meat delivery startup Licious said its buyback will cover the blue-collared workforce along with other eligible employees.