The famous food and grocery startup Swiggy is in the limelight due to its decision to buy back ESOP worth $50 million from its 2000 employees. The shares issued to employees were a part of the company’s employee stock option plan (ESOP) in 2021. The company said to its employees that they would be rewarded for their performance in 2022 and 2023. In July 2023, the company announced buying back EPOS from employees who bought shares back in 2021, so this was a two-year liquidity program. Undoubtedly, every employee of the company wants to know the reasons behind this decision. Let’s read about ESOP, the reasons why the company buys it back, and its impact on Swiggy unlisted share prices. Without any ado, let’s talk about it.
What ESOP And How Does It Work?
As you know, ESOP stands for employee stock option plan, an employee benefit plan offering workers ownership interest in the company. This interest takes the form of shares of the stock. ESOPs are offered to the company’s employees to allow them to participate in the company’s growth. It rewards employees for their commitment and performance.
The ESOP works under a plan or scheme where shares get allotted in a period ranging from 1 to 5 years and so on. You must know that ESOPs have huge value when the companies get listed on the recognised stock exchanges and where employees are free to sell these shares on the open market.
What Is Buy Back?
In simple terms, a buyback under the companies act 2013 is a corporate action in which a company buys back its shares from its existing shareholders by utilising its free reserves or issuing another security. With buy back, companies can invest in themselves, as Swiggy is trying to do.
Reasons For Swiggy To Buy Back | Mystery Revealed Here
Firstly, the company announced its ESOP buy back plan in 2021 and was rescheduled to be completed in two tranches. The first was scheduled for July 2022, and the final was for July 2023. You should know that last year in July, Swiggy bought back shares worth about $20-$30 million from its 900 employees. The company will buy back the remaining shares worth $27-$30 million to complete its final round. The entire buy back exercise of both tranches is worth $50 million, more than $35-$40 million, which the company expected earlier.
Swiggy’s buyback decision came at a time when the majority of new companies have been compelled to tens of thousands of employees to conserve cash and extend their cash runways. Girish Menon, head of HR at Swiggy, said, “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.”
With this statement and everything mentioned above, buying back ESOPs is a part of the liquidity exercise the company announced in 2021. Since 2018, the company has bought back ESOPs four times, with surging size every year.
As per the sources, Swiggy’s valuation is now almost similar to Zomato, whose market capitalisation was valued at $8.7 million on July 24, 2023. Even when the company was valued at $10.7 million during its last fundraiser in 2022.
Shriharsha Majety, CEO and Co-founder of Swiggy said, “The core business of the company, which is food delivery, turned EBITDA positive excluding ESOP cost as of March 2023.” With this statement, Swiggy joined a growing list of new-age companies that rewarded their employees this year.
Swiggy IPO Plans
Marked its presence in 2014, Swiggy, India’s renowned food-tech giant, is reportedly planning an Initial Public Offering (IPO) soon. Before the launch of its IPO, the company wants to keep its business profitable and wants to get rid of struggles. You will be amazed to know that the company is seeking to raise $1 billion in an IPO. However, Swiggy IPO timing and money raised can be changed per the company’s performance, market conditions, and other factors. Further, the company hasn’t released any date as to when it will go public.
Why Should You Buy Swiggy Unlisted Shares?
Swiggy is a growing company with a positive presence and profitable business operations since its inception. There is no doubt that the company will be beneficial for retail investors who are looking to buy Swiggy unlisted shares. Indeed, investing in Swiggy pre-IPO shares will be profitable, especially if you buy its shares before IPO. Swiggy’s unlisted shares are currently trading at Rs. 360, which might change based on the company’s performance and IPO. If you want to buy Swiggy unlisted shares and experience easy trading, count on India’s best online broking platform, Stockify. Stock broking experts here will guide you throughout the trading process. Speak to the broker today!