Swiggy announces second tranche of ESOP buyback plan totaling $50 mn

Employees who moved from Dineout after Swiggy bought it last year, will also be eligible for the liquidity programme

Food aggregator platform Swiggy on Monday announced that it will buy back shares totalling $50 million from over 2,000 employees as part of the second tranche of its two-year employee stock ownership plan (ESOP) liquidity programme.

Employees who transitioned from Dineout, following its acquisition by Swiggy last year, will also be eligible for the liquidity programme, the company said.

“Two years ago, Swiggy announced a one-of-its-kind ESOP programme to enable consistent wealth creation for employees through two distinct liquidity events in 2022 and 2023,” said Girish Menon, Head of HR at Swiggy.

“Our team is Swiggy’s most valuable asset, and we are happy that macroeconomic conditions notwithstanding, we’re able to keep our commitment of sharing Swiggy’s success and growth through these wealth creation opportunities,” he added.

 

This is Swiggy’s fourth liquidity event since 2018. In June last year, the firm had initiated the first tranche of its two-year programme where it had bought back employee shares totalling $23 million.

The food delivery firm’s losses jumped 80 per cent year-on-year (YoY) between January 1-December 31, 2022, the company’s biggest investor, Prosus, said in its annual financial report last month. This translates to an overall loss of about $545 million for the food aggregator during the year.

Despite this, CEO Sriharsha Majety announced in May that Swiggy’s food delivery business turned profitable in the March quarter of FY23 (Q4 FY23) after considering corporate costs and excluding ESOPs.

The company’s buyback plan also comes at a time when employee earnings from ESOPs have come down from the highs of ~$400 million in 2021 to less than ~$100 million this year, according to equity management platform Qapita.

While the funding torpor has had no significant impact on the issuance of ESOPs, a liquidity crunch has caused the wellspring of ESOP buyback programmes to run dry.

These programmes are the primary method of liquidation for employee-owned stocks, and have, of late, taken a plunge as companies are looking to reduce cash burn and improve margins. Years 2021 and 2022 combined saw a record quantum of ESOP buybacks of more than $700 million, on the back of the increased venture capital and private equity investments.

In 2022 alone, over 40 companies announced ESOP buyback programmes. In contrast, only seven companies announced programmes in the first quarter of this year, signposts data from Qapita.

These include a massive $700 million payout by Flipkart, among other notable companies like educational technology start-up Sunstone, logistics firm Porter, artificial intelligence and analytics firm Tredence, and direct-to-consumer brand The Souled Store.