Zerodha to buyback ESOPs worth Rs 65 Cr

Online stockbroking platform Zerodha has announced it will buy back employee stock options worth Rs 65 crore from around 700 of its employees. The buyback deal will be at Rs 700 per share, valuing the company at around Rs 7,000 crore.

It's worth noting that Zerodha had allocated its ESOP pool worth Rs 200 crore in September last year for its 850 employees. The proposed buyback will majorly benefit around 30-40 of the ESOP holders as per company CEO Nithin Kamath. 

The company will buy back the earmarked shares at more than 4X the book value, amounting to Rs 170 per share and the number of shares to be bought back per employee will depend on their performance.

According to an ET report, Zerodha’s buyback program will allow 5-50% of options vesting this year. This program will reward 700 employees of the company which established itself as the biggest share brokerage firm in India in terms of active clients.

The ESOP buyback comes at a time when the company has witnessed a huge growth spurt in its users in the last three months as more retail investors ventured into investment in the share market due to high volatility. On the contrary volatile markets attract increased numbers for share traders who want to either earn via trading shares or invest in companies that are undervalued.

The low-cost sharebroker onboarded around 300K users in March followed by around 200K users per month during the last three months. 

About to turn a decade old in August this year, Zerodha has not raised any external capital yet, so no fair market valuation of the company has been done. Its own operating cash flows have fueled its growth. Zerodha offers retail and institutional broking, currencies, commodities trading, bonds, and mutual funds investments. 

Zerodha being one of the few fintech firms to be profitable had claimed a net profit of Rs 350 crore in FY19.  A month ago, the Kamath brothers had also registered a new non-profit company - Rainmatter Land Development - to help mitigate the increasing risk of climate change. 

Rewarding employees with ESOP repurchase plans has been the practice at startups for quite some time now. In the past year, Oyo, Unacademy, Meesho, CarDekho, Swiggy, and Byju’s have rewarded their employees via stock buyback or secondary transactions.