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Zerodha valued at $2 billion, plans $25 million ESOP buyback

Online brokerage Zerodha's valuation has doubled to $2 billion within a year, underscoring the stock market investing frenzy underway in India. Zerodha is also planning a stock buyback, giving early employees a financial windfall

Mumbai / May 28, 2021 / 05:11 PM IST
Zerodha founder Nithin Kamath

Zerodha founder Nithin Kamath

Online brokerage Zerodha is planning to buyback shares from early employees at a valuation of $2 billion, doubling in a year with stock markets on a historic bull run, founder and CEO Nithin Kamath tweeted on May 28.

Zerodha plans to buy back employee stock option plans (ESOP) worth about $25 million (Rs 150-200 crore) in July-August this year, a move that will benefit 900 out of its total 1000 employees, Kamath told Moneycontrol.

The $2 billion valuation is also a key milestone given that Zerodha is one of the very few internet startups to not have raised any venture capital money while getting to a high valuation.

“While our growth is exciting, we know that this isn’t sustainable. A broking business is an extremely high beta - highly correlated with the market conditions. Even if there was a mini bear market, our business could drop by 40% in a heartbeat,” Kamath said in a Twitter thread.

"Everyone holds ESOPs & continuously get new options too. We ran a buyback last year at $1bil valuation & we will this year at $2bil. Maybe conservative valuations, but our business risks are high. Personally, the proudest moment in this journey,” he added.

This is the second ESOP buyback Zerodha will conduct, after it bought back shares worth Rs 60-65 crore in November last year.

For years, internet firms have struggled to sell ESOPs as a worthy compensation tool for high-profile employees as a lack of cash exit plagued the ecosystem, but this has changed sharply in the last one year. A dozen startups including Razorpay, Meesho, Cars24, Shadhowfax and Cred have given early employees a financial windfall by buying back their shares at high valuations.

Moneycontrol also reported that Zerodha’s co-founders- Nithin and Nikhil Kamath, along with the CEO’s wife Seema Patil are set to take an annual salary of Rs 100 crore each. Basic salary for the trio will be Rs 4.17 crore per month plus incentives and allowances of Rs 4.17 crore, taking the family’s yearly take home to a “neat Rs 300 crore”, cumulatively.

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M. Sriram
M. Sriram
first published: May 28, 2021 05:11 pm