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To be effective from April, the New Delhi-based e-marketplace company has decided to make 10 per cent of its total share capital available for ESOPs. Until now, a little more than six per cent of its share capital was allotted for ESOPs.
The move is a measure to retain existing employees and attract new ones. The development comes at a time when e-commerce giant Flipkart plans to add over two per cent of its capital for ESOPs, taking it close to seven per cent of the total. Flipkart has an estimated employee strength of 33,000.
About one-third of Snapdeal’s 4,000 employees will be entitled for ESOPs. The Kunal Bahl-led company has also decided to allow a 10-year window for selling ESOPs after an employee leaves the organisation. “We have brought these changes for wealth creation for our employees based on performance. The ESOPs will be spread across one-third of our employee base. About 60-70 per cent of it will go to junior staff and 5 per cent to senior management,” said Suarabh Nigam, vice-president for human resources at Snapdeal.
Nigam said share values of Snapdeal, run under Jasper Infotech Pvt Ltd, had grown at least four times in the recent past. The restructuring will park $500 million in ESOPs as Snapdeal is seeking a valuation of $5 billion. The company is expecting to overtake rival Flipkart in gross merchandise value to reach $9-10 billion by the end of this year. Flipkart is aiming to double its gross merchandise value to $8 billion in 2015.
Offering ownership through ESOPs is a tested tactic in the new economy. A year ago, Snapdeal had ESOPs for one-third of its workforce but the number of employees has more than doubled since then. Salaries of senior managers in e-commerce companies have climbed to Rs 1.5 crore from Rs 80 lakh recently.
MANAGING THE WORKFORCE
- Snapdeal plans to infuse fresh 4 % share capital for ESOP, taking total tally to 10%
- To be effective from April 2015, the scheme will cover one-third of Snapdeal’s workforce of 4,000
- The time period to exercise selling ESOP shares after resigning will be extended to 10 years
- Soaring valuations is one of the sweet spots of ESOP, given the value of these shares rise rapidly
- 60-70% of ESOP would be among junior level executives, while the top-level management would get 5%
