In a strategic move reflecting its commitment to employee engagement and retention, food delivery giant Zomato has announced the granting of 11,997,768 shares through its employee stock ownership plans (ESOPs). This development was disclosed on Wednesday, October 2, 2024. As of the latest trading session, Zomato’s shares closed at ₹275.20 on the Bombay Stock Exchange (BSE), valuing the total ESOPs at an impressive ₹330.17 crore.
Understanding the ESOP Structure
Of the total shares allocated, the majority—11,997,652 options—are part of the “ESOP 2021” scheme, while a smaller portion, 116 options, is associated with the earlier “ESOP 2014” scheme, known as the “Foodie Bay Employee Stock Option Plan.” This allocation of shares through different ESOP schemes underscores Zomato’s ongoing efforts to incentivize its workforce.
What are ESOPs?
Employee Stock Ownership Plans (ESOPs) serve as a powerful compensation tool that grants employees the option to purchase company stock at a predetermined price. This not only functions as a financial incentive but also aligns employee interests with the company’s performance. When employees believe in the company’s growth, they are likely to contribute more effectively toward achieving its goals, boosting both morale and productivity.
ESOP Mechanics
The face value of each ESOP is set at ₹1, and these options can be exercised within a window of 10 years from the vesting date or 12 years from the date of listing, whichever is later. Importantly, these ESOPs will not be subject to any lock-in period, offering employees greater flexibility to capitalize on their shares whenever they find it beneficial.
Recent ESOP Activities
This latest ESOP issuance follows earlier approvals by Zomato for 40,739,330 stock options in July, along with an additional 19,82,980 stock options covering 35,17,051 equity shares in August. Such frequent ESOP grants indicate Zomato’s active strategy to foster growth and retain talent in a competitive market.
Zomato vs. Competition
The announcement comes amid heightened competition as Zomato’s main rival, Bengaluru-based Swiggy, gears up for an initial public offering (IPO). Originally planned to raise ₹3,750 crore, Swiggy’s shareholders have decided to increase this amount, now expecting to raise ₹5,000 crore. The intense competition underscores the need for companies like Zomato to solidify their workforce, given that they are the two major players dominating India’s online food delivery market.
Zomato’s Stock Performance
As of Friday, October 4, 2024, Zomato’s share price closed at ₹275.20 on the BSE, reflecting a weekly rise of 2.38%, or a gain of 6.40 points. The ESOP announcement was made on October 2, coinciding with the closure of markets for Gandhi Jayanti, but it still has a positive impact on investor sentiment.
Market Reaction
On Thursday, October 3, Zomato’s shares experienced a slight decline, closing at ₹269, marking a decrease of 1.88% or 5.15 points. This fluctuation in stock price showcases the volatility that can accompany large-scale share allocations and the overall market dynamics.
| Share Options | Scheme | Face Value | Total Value |
|---|---|---|---|
| 11,997,652 | ESOP 2021 | ₹1 | ₹330.17 crore |
| 116 | ESOP 2014 | ₹1 | N/A |
