Rewarding employees with ESOP repurchase plans has been the practice at startups for quite some time now. The stock buyback by existing or new investors is a good sign for the startup ecosystem, which reflects faith in their portfolio as well as their employees.
The trendsetters of ESOPs such as Flipkart, Ola, Paytm, Byju’s, Freshworks, PolicyBazaar, Swiggy, Delhivery, Droom, Rivigo, among others, have rewarded their employees with secondary transactions.
Joining the league are two more startups from a different segment – Razorpay and Moglix – which will purchase their employees’ vested stock options. For Razorpay, the deal will be powered by its existing backers, Ribbit Capital and Sequoia Capital. In June, the duo had led a $75 million Series C round in the Bengaluru-based startup.
Ribbit and Sequoia have purchased ESOPs worth about $4 million from employees across designations, including entry-level staff, said an ET report.
This is the second time Razorpay’s employees will be able to encash their stock options. Last year, Tiger Global had purchased shares of 140 employees of the digital payment solutions company.
The company has closed the deal at the current valuation. In the last funding round, it was valued at about $450 million.
According to Razorpay’s CEO Harshil Mathur, the deal has been done at a 15% discount, valuing the employee stock options at over $380 million.
He further revealed that 400 employees are eligible in the latest round. The eligibility criteria include employees who have spent a year in the company. It will also consider those who have left the company after spending the required stint.
While founders are not allowed to sell their stocks in this round, employees can sell one-third of their vested stocks.
Moglix, a B2B industrial goods marketplace, has purchased stocks from about 25 employees worth Rs 5-10 crore. The company, which also counts Sequoia and Tiger Global as backers, will reward its employees ranging from deputy managers to senior executives.
Of late, Paytm and Byju’s have expanded their ESOPs pool in their latest scheme. The edtech Unicorn had expanded its ESOPs pool by 3.5X to Rs 1,300 crore, whereas the payments major had added Rs 300 crore to its revised ESOP plan.
