Flipkart completes buyback of ESOPs worth $100 mn

Over 3,000 current and former employees of Flipkart, Myntra, Jabong and PhonePe participated in it

India’s largest e-commerce marketplace Flipkart on Wednesday said it has completed the $100-million buyback of employee stock options (ESOPs), making it the largest share buyback programme by an unlisted company in the country.

The programme allowed over 3,000 current and former employees of Flipkart as well as subsidiaries Myntra, Jabong and PhonePe to sell a percentage of their stock options. This is the fourth and largest share buyback Flipkart has done in the past five years.

“Employees are our biggest source of strength, without whom Flipkart couldn’t have built the e-commerce industry in India. As an organisation, we believe they should be equal partners in Flipkart’s success. This ESOP repurchase programme is an extension of that culture, and a token of thanks for the dedication and hard work they have put in over the years,” said Sachin Bansal, Chairman of Flipkart, and Binny Bansal, Group CEO, in a statement.

The call for buying back shares came soon after Flipkart raised $2.5 billion from Japanese investor Softbank in August which had agreed to buy shares from existing investors in the company. Late last month, Softbank had reached out to other investors in Flipkart to buy their stock at a valuation of $9-10 billion.

Softbank has committed to invest $1.2-1.4 billion in purchasing shares in Flipkart on the secondary market, people in the know have told Business Standard. Apart from employees, investors such as Tiger Global and Accel Partners are expected to cash in, as Softbank looks to increase its shareholding in India’s only competitor to US online retail giant Amazon.

Flipkart would buy back shares at a cost of $85.2 per share with a transaction fee of around $3-4 according to news reports in October. Current employees would be able to sell up to 25 percent of their stock options while former employees would be allowed to liquidate only 10 percent of their holdings.

Flipkart says the share buybacks are a way for it to share some of its success with employees. It has wanted to be seen as a company that goes out of its ways to protect employee interests. In April, after the company raised $1.4 billion from Tencent, eBay and Microsoft at a valuation of $11.6 billion (down from a peak of 15.2 billion), Flipkart said it would compensate all eligible employees with additional shares to make up the difference.

"It is not common practice to shield employees from a funding round that values a company lower than it was valued at earlier. That privilege is usually reserved for investors,” Sachin Bansal and Binny Bansal had said in a joint statement at the time.

Snapshot

• Flipkart disbursed over $100 million to buyback stock options from current and former employees
• The decision to buyback shares was taken soon after SoftBank invested $2.5 billion in Flipkart
• SoftBank has committed to invest $1.2-1.4 billion in buying shares from existing investors & employees
• In April, Flipkart employees were given “differential ESOPs” to compensate for the company’s drop in valuation
• Flipkart says the share buybacks are a way for it to share some of its success with employees