Zomato seeks approval from shareholders for creation of new ESOP pool

The company said that under the ESOP 2024, it will grant shares of 18.26 crore to the employees of the company

Zomato is planning to set up a fresh employee stock option plan (ESOP) of 18.26 crore shares worth Rs 3,500 crore. This new ESOP pool will cater to the next five years, said the company.

The company, in a regulatory filing, said that under the ESOP 2024, it will grant shares of 18.26 crore to the employees of the company. Zomato’s current share price at the end of the market day was Rs 193.7.

As part of its fourth-quarter results, the management announced its intention to set up an additional ESOP. The company also said that it has sought shareholder approval for the creation of this ESOP, which is 2 per cent of the firm's outstanding share capital on a fully diluted basis.

Akshant Goyal, chief financial officer, Zomato, in the letter to the shareholders, said: “ESOPs are important to help build a culture of long-term thinking and innovation and create a ‘founder mindset’ amongst senior employees, which ultimately drives the right outcomes for long-term shareholder value creation. Also, in people-dependent businesses like ours, where great execution and constant innovation are the only determinants of survival, ESOPs are a great way to drive the high-performance culture that we thrive on.”

The company also added that it will continue to follow the earlier format of ESOPs with face value as the strike price; vesting will be linked to time and performance conditions (details of which will follow in the postal ballot notice for shareholders’ approval).

Meanwhile, the total ESOP charge for the fourth quarter of the financial year 2024 was Rs 161 crore as compared to Rs 122 crore for the third quarter of the financial year 2024.

“We expect the ESOP charge to increase further in the financial year 2025 on account of the grant of ESOPs to the Blinkit leadership team and senior employees,” said Goyal.

At an overall level, Zomato’s total employee expense (including cash expense and non-cash ESOP charge) as a percentage of Adjusted Revenue has reduced from 29 per cent in the financial year 2022 to 12 per cent in the financial year 2024.

Goyal further added, “Despite the expected increase in both the ESOP charge and the cash employee expense, we expect this ratio to continue trending downwards in the financial year 2025 and beyond. Also, just to be clear, the creation of the new ESOP pool mentioned above by itself will not lead to any increase in ESOP charge. ESOP charge is a non-cash expense and is booked only when the ESOPs are granted to employees.”