Swiggy's $271 mn Esop plan benefits top brass before $1.25 bn IPO launch

Food and grocery delivery giant Swiggy, which is gearing up for its highly anticipated initial public offering (IPO), has earmarked a substantial $271 million in employee stock options (Esops) for its founders and senior executives as part of its latest stock-based compensation plan, as revealed in its pre-listing prospectus.

This Esops plan underscores Swiggy’s commitment to rewarding its leadership team as it prepares to go public.

The bulk of these Esops — nearly $200 million — has been awarded to Sriharsha Majety, the Bengaluru-based company’s founder and group chief executive officer. Other recipients include cofounders Nandan Reddy and Phani Kishan Addepalli, chief financial officer (CFO) Rahul Bothra, chief technology officer (CTO) Madhusudhan Rao, food marketplace CEO Rohit Kapoor, and Amitesh Jha, the newly appointed CEO of Swiggy’s quick commerce arm, Instamart.

 

Under the Esop 2024 scheme, Majety, who currently holds a 6.23 per cent stake in the company on a fully diluted basis, is set to increase his holding by an additional 2.2 to 2.5 per cent. He also plans to sell shares worth $7.5 million through the IPO’s offer for sale (OFS) component.

In secondary share sales between July and September, Majety and Reddy offloaded shares worth $23 million and $12 million, respectively. This follows a broader trend among internet startups, where founders and senior leaders often see heavy dilution of their stakes through successive fundraising rounds and are incentivised through Esops ahead of an IPO.

Jha, who joined Swiggy in September from Flipkart, was granted options worth $13.3 million. Kapoor, who has been with Swiggy since August 2022, received $9.8 million in stock options. Meanwhile, former chief growth and marketing officer Ashwath Swaminathan, who stepped down at the end of September, was awarded $5.7 million in stock options under the same plan.

The Esop grants have a vesting period ranging from one to eight years, meaning that the actual value of the stock awards will depend on Swiggy’s performance post-IPO. Changes in Swiggy’s stock price following the listing could impact the valuation of these stock rewards.

Swiggy’s $1.25-billion IPO is one of the most awaited public listings in India’s startup ecosystem. The company initially filed its regulatory documents with the Securities and Exchange Board of India (Sebi) in April through a confidential filing. In September, Swiggy filed an updated draft prospectus after receiving approval from Sebi. The fresh issue component of the offering, initially pegged at $450 million, could be increased to $600 million, depending on market conditions.

In addition to Majety and Reddy, Swiggy’s key investors, including its largest shareholder Prosus, Norwest Venture Partners, Elevation Capital, Accel, Coatue, and Alpha Wave Global, are expected to participate in the OFS.

Swiggy’s compensation plan mirrors similar moves by other high-profile tech companies ahead of their public listings. In 2021, Zomato, Swiggy’s chief rival, granted Esops worth $376 million to its founder and CEO, Deepinder Goyal, ahead of its IPO. As of June 2023, Goyal held a 4.2 per cent stake in Zomato valued at over $1.2 billion.

Similarly, Paytm’s parent company, One 97 Communications, awarded stock options to its founder and CEO, Vijay Shekhar Sharma, in 2021 ahead of its IPO, although the grants later attracted scrutiny from Sebi. Other tech startups, such as Freshworks, Delhivery, and PB Fintech, have also offered stock-based awards to their top management and founders ahead of their respective IPOs.

Swiggy’s public listing comes at a time when India’s tech startup ecosystem is eagerly watching how companies like Swiggy will fare in the public markets amid ongoing global macroeconomic challenges.