Food Delivery Giant Zomato Grants RS 330 Crore In ESOPs Amid Swiggy IPO Buzz; What Does It Mean?

Zomato, the Indian food delivery giant, recently announced a significant move to reward its employees by granting 1,19,97,768 shares under its Employee Stock Ownership Plans (ESOPs). This revelation was made on Wednesday, October 2, 2024. With Zomato's shares closing at Rs 275.20 on the Bombay Stock Exchange (BSE) during the last trading session of the week, the total value of these ESOPs stands at Rs 330.17 crore.

The ESOP grant is divided into two schemes:

ESOP 2021: 11,997,652 shares

Foodie Bay Employee Stock Option Plan (ESOP 2014): 116 shares

ESOPs are a popular form of compensation used by many companies, especially startups and tech-driven firms like Zomato. They provide employees with company stock options, allowing them to buy shares at a predetermined price after a certain period.

In Zomato's case, each ESOP has a face value of Rs 1 and can be exercised within 10 years from the date of vesting or 12 years from the company's listing date, whichever is later. The absence of a lock-in period offers employees flexibility in exercising their options.

The majority of the granted shares, nearly 12 million, fall under the "ESOP 2021" scheme, while a small fraction is tied to the older "Foodie Bay Employee Stock Option Plan" from 2014.

Zomato's Stock Performance and ESOP Value

As of the last trading session on Friday, October 4, 2024, Zomato's shares closed at Rs 275.20, representing a 2.38% gain for the week. This rise translates to a weekly increase of 6.40 points. However, it's worth noting that Zomato's stock dropped slightly on Thursday, October 3, when it closed at Rs 269, a decrease of 1.88% or 5.15 points.

These fluctuations came after the Gandhi Jayanti holiday on October 2, when the market was closed, and Zomato had made its filing regarding the ESOP grant. Despite the minor dip mid-week, Zomato shares showed resilience, ending the week on a positive note.

This is not Zomato's first large-scale ESOP grant in 2024. Earlier in July, the company had approved 40,739,330 stock options, followed by another 19,82,980 stock options in August, which covered 35,17,051 equity shares. The current October ESOP announcement adds to these grants.

The timing of this new round of ESOPs is particularly interesting, as it coincides with the ramping up of Swiggy's initial public offering (IPO). Swiggy, Zomato's primary rival, is gearing up for a Rs 5,000 crore IPO, a significant increase from its originally planned Rs 3,750 crore offering.