Three top executives – PB Fintech chairman and founder Yashish Dahiya, chief financial officer Alok Bansal, and policybazaar.com CEO Sarbvir Singh – were granted employee stock options (ESOPs) worth more than Rs 1,044 crore in FY22 when the company went public.
The company's annual report showed that Yashish Dahiya got ESOPs of PB Fintech worth Rs 614 crore during the period, Alok Bansal received grants worth Rs 361 crore and Sarbvir Singh Rs 69 crore. While Dahiya and Singh did not draw any other salary or allowances in FY22, Bansal drew Rs 1 crore.
Dahiya was granted 7 million ESOPs in FY22, Bansal got 3 million units and Singh 1 million. This means that of the 18 million plus ESOPs granted by the company during FY22, around 61 percent was awarded to the three top executives.
The exercise price of these stock options were set at Rs 2 apiece. Shares of Policybazaar parent company PB Fintech are currently trading at Rs 509 apiece, down 48 percent from its initial public offering (IPO) issue price of Rs 980 apiece last year.
The company’s annual report also revealed that a cumulative of 12 million ESOPs granted to the founders and top executives have a vesting period of five years (20 percent each year) and are subject to the condition that the company’s market-capitalisation is above $5 billion (around Rs 39,800 crore at prevailing exchange rates) on an average during the vesting year.
The current market capitalisation of PB Fintech is Rs 22,962 crore.
However, the stock options won’t lapse in case the m-cap goals are not achieved. They would simply be carried forward to the coming years and vest whenever the average yearly market valuation is above $5 billion.
According to related party transaction filings made public by the company, Dahiya’s gross remuneration rose 409 percent to Rs 285 crore in FY22, compared to Rs 56 crore in the previous financial year. Alok Bansal’s gross pay rose 396 percent to Rs 124 crore in FY22, compared to Rs 25 crore in the preceding fiscal.
The company has sought shareholders’ approval for the remuneration paid or payable as the above-mentioned amounts in its upcoming annual general meeting.
The filings also showed that while the total compensation of Policybazaar’s key managerial personnel (KMPs) increased 406 percent to Rs 410 crore in FY22, as share-based payments to these top executives zoomed 5 times to cross Rs 406 crore during the period.
Such share-based payments are common at technology startups as a way of rewarding employees for the company’s long-term growth.
“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” Sanjeev Bikhchandani, founder of Info Edge, which was an early investor in Policybazaar and Zomato, said recently.
“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,” he added.
The fintech incurred a net loss of Rs 833 crore in FY22 on revenue of Rs 1,425 crore.
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.
Also, fintech major Paytm saw its ESOP expenses of the KMPs, including CEO and managing director Vijay Shekhar Sharma and CFO Madhur Deora, surge 50 times to Rs 567 crore in FY22, up from Rs 11.2 crore in the previous financial year.
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