Swiggy begins second tranche of ESOP buy back totalling to $50 mn from 2,000 employees

Swiggy file photo

Food and grocery delivery startup Swiggy said it has begun buying back shares from around 2,000 staffers in the second tranche of a planned employee stock option plan (ESOP) liquidation exercise which was first announced in 2021.

The buyback comes at a time when the Indian startup ecosystem is in the midst of a funding winter which has forced several new-age companies to conserve cash and extend their cash runways which has mostly happened by laying off tens of thousands of employees.

The ESOP buyback plan was first announced in 2021 and was scheduled to be completed in two tranches, with the first one slated for July 2022 and the final one for July 2023.

In July 2022, Swiggy bought back shares worth about $20-23 million from 900 employees and the company will now buyback shares worth the remaining $27-30 million in the new round, marking a full close, Moneycontrol has learnt. The company did not comment on the exact split between the two rounds.

The entire ESOP buyback exercise, across both tranches, was worth $50 million in total, slightly higher than $35-40 million as Swiggy had estimated earlier.*

Since 2018, Swiggy has bought back ESOPs four times with the size increasing each year. According to reports, the Bengaluru-based company bought back shares worth $4 million in 2018, then spent $9 million in 2020.

After a break of about two years, Swiggy bought back shares worth $20-23 million in 2022 and now it will be paying out $27-30 million to 2,000 employees which represent less than half of its overall strength of just over 5,000.

This would include employees that moved from Dineout to Swiggy after the former was acquired.

"Our team is Swiggy's most valuable asset and we are happy that macroeconomic conditions notwithstanding, we're able to keep our commitment of sharing Swiggy's success and growth through these wealth creation opportunities," said Girish Menon, Head of HR at Swiggy.

While the company did not shed light on the breakup and the price of each share, Moneycontrol has learnt that Swiggy's valuation was now similar to Zomato , its BSE-listed peer, which had a market capitalisation of $8.7 billion on July 24.

That was despite Swiggy being valued at $10.7 billion during its last fundraise in January 2022. Since then, Swiggy has seen a series of markdowns which valued the startup at a price lower than what it commanded during its previous fundraise.

However, Sriharsha Majety, CEO and co-founder had said the company’s core business, food delivery, had turned adjusted EBITDA positive (excluding ESOP costs) as of March 2023 while other verticals like Dineout Instamart, its quick-commerce arm, had were showing improvement in financial health, too.

With the announcement, Swiggy joins a growing list of new-age companies that have rewarded their employees this year. Earlier this month, Moneycontrol had reported that about 19,000 Flipkart employees were paid a whopping sum of $700 million following the company’s split with PhonePe.

*Note to readers: The story has been updated after Swiggy sent a revised statement saying that the entire buyback exercise was worth $50 million in total which was split across two rounds.