Esop bonanza: Payouts surge 30% to ₹15,000 crore in FY25, shows data

Listed entities spent nearly ₹15,000 crore last financial year on programmes that allow employees to share ownership of the companies in which they work. 

The total amount expensed as part of employee stock option plans (esops) rose 30 per cent in 2024-25 (FY25), compared to a 19 per cent increase in the previous year, according to data from the Centre for Monitoring Indian Economy (CMIE). 

The total spent was  ₹14,900 crore on a limited sample of companies, compared to ₹11,461 crore in 2023-24 for a full sample.

 

The Securities and Exchange Board of India eased esop norms earlier in September, allowing startup founders to retain esops granted a year before listing their companies. The available data is based on cash flow statements collated from listed company disclosures by CMIE. It covers a partial sample with data from 1,724 non-finance companies and 515 financial sector ones in FY25. 

Full data for the previous year included 3,867 non-finance and 989 financial companies. The esop numbers may cover only a portion of the total amounts involved in such programmes from an accounting perspective, according to CMIE. However, the current numbers are larger than the full sample for previous years, broadly suggesting an increasing trend. 

Non-financial companies saw a 34 per cent rise in esop expenses to ₹9,326 crore in FY25, while financial firms recorded a 23.8 per cent increase to ₹5,573 crore over the same period. 

The conversion price is at a deep discount in many cases to the market price, which can cause expenditure numbers to rise according to Mohini Varshneya, partner at Delhi-based Corporate Professionals. 

Startups were the major drivers of esops as a compensation and retention tool, but traditional companies across sectors have also started using them. They are increasingly being given to middle-rung employees, unlike before, pointed out Varshneya.

“Earlier, it was given only to key managerial personnel,”  she said.

 

Companies that have recorded esop expenses include startups like Swiggy and Eternal (Zomato), as well as firms such as Mahindra & Mahindra, Wipro, and HDFC Bank. 

“Earlier it was just with the IT (information technology) companies and banks; now it is more widespread,” agreed Amit Tandon, founder and managing director of advisory firm Institutional Investor Advisory Services India. 

A large number of startup listings may also have caused the absolute value of esop expenses recorded by listed companies to rise. It may be appropriate for those offering equity at deep discounts to link it to pre-declared performance targets, added Tandon. 

All major industries have seen an increase in esop expenses, though growth has varied. Year-on-year esop expense growth in FY25 was 8.7 per cent for construction and real estate and 24.6% for manufacturing companies. Non-financial services esop expenses rose 39 per cent. Mining and electricity sector allocations were less than ₹100 crore combined, with the low base contributing to the high growth recorded for the electricity industry.