Flipkart has begun rolling out a cash payout worth $700 million to employees as part of compensation for the loss of value after the PhonePe separation. This is the largest one-time cash payout at any startup operating in India.
“…The board had decided to pay $43.67 as compensation for each ESOP (vested options for eligible current and former stakeholders and unvested options only for eligible current stakeholders) as of the record date of December 23, 2022,” said Kalyan Krishnamurthy, CEO of Flipkart, in an internal email to employees.
The board of directors of Flipkart Private Limited announced the complete separation of the PhonePe business by selling off its entire shareholding in December 2022.
Since hive off, PhonePe has raised a total of $850 million in primary capital in the current round, which is expected to close at $1 billion. The fresh funds were raised at a pre-money valuation of $12 billion.
While Flipkart did not disclose the number of employees as a part of the compensation, an ET report earlier highlighted that more than 24,000 employees, including former Flipkart and Myntra staff, will be given the cash payout.
After a record buyback of employees’ stock in 2021, the Indian startup ecosystem saw a sharp decline in the buyback, liquidity, or payout program. As per data compiled by Fintrackr, around 25 startups announced ESOP buybacks worth $200 million in 2022, a fall from $440 million worth of ESOP buybacks in 2021. Flipkart was on top with $80.5 million ESOP buyback in 2021.
In 2023, only Winzo, Tredence and Sunstone announced their employees’ stock buyback program, which collectively was worth nearly $35 million.
The latest buyback is welcome news at a time when valuations have been getting a little ragged, and ESOP buybacks at scale rarer. That it comes from Flipkart, one of the earliest and till now most storied startup in terms of ESOP success, is great news for the thousands of employees who will benefit. But it is also indicative of the long way many of the other ‘unicorns’ have to travel, as employees continue to miss out due to missteps by founders in terms of negotiating or distributing ESOPs fairly.
