Swiggy ESOP liquidity: Founders Sriharsha Majety, Nandan Reddy and others to sell shares in $65-million programme

Sriharsha Majety. co-founder and Group CEO of Swiggy

Swiggy’s co-founders, Sriharsha Majety and Nandan Reddy, along with other employees of the food delivery company will be selling some shares in the company’s upcoming employee stock ownership plan (ESOP) liquidity event programme worth $65 million (around Rs 540 crore).

The shares, sold by employees across levels, will be mopped up by other investors who want to buy shares in Swiggy. While the company has announced an ESOP liquidity event in the past, it typically buys back shares from employees. But not this time.

As part of the current arrangement, employees will be able to tender shares they hold in the company to other willing buyers. All ESOP events considered, Swiggy said it has cumulatively enabled over Rs 1,000 crore of ESOPs liquidity over the past five events, benefitting over 3,200 employees.

The fresh liquidity event will also see co-founder and Group CEO Majety and Reddy selling Swiggy shares in the run up to the IPO, Moneycontrol has learnt.

The ESOP liquidity event is to enable payment of perquisite tax for employees, especially at the top level, to exercise their shares and become shareholders ahead of a stock market listing, a person aware of the developments told Moneycontrol.

Company shares will be sold as part of the ongoing secondary transactions where the company is valued at $9.3 billion. Investors and bankers are buying and selling Swiggy’s shares at Rs 330-350 apiece in the secondary transactions, as reported earlier.

“As we approach the milestone of a decade of consumer love for Swiggy, the latest ESOP event is an acknowledgement of our employees' contributions, and our commitment to sharing Swiggy’s success and growth with them," Girish Menon, Head of HR at Swiggy

ALSO READ: Zomato founder-CEO Deepinder Goyal joins billionaire club

One important thing to note is that these ESOP cashouts have been happening despite a taxation regime that is perceived by the industry as being adverse. While any shareholder in a listed company is taxed on gains after the shares are sold, ESOPs are taxed when they are availed by employees.

ESOP grants are typically structured such that only a part vests after every year of employment. For example, if A is granted 100 ESOPs as part of her pay package, typically 25 will get vested after the first year, 25 after the second year of employment and so on.

As the 25 ESOPs get vested, employees get the choice of converting the options into shares of the company at a certain exercise price or strike price, which is kept below the actual share price of the company.