Flipkart personnel will receive a $700 million cash compensation this month following the Flipkart-PhonePe split.
Flipkart employees will receive a one-time cash payout from a $700-million employee stock option (Esop) buyback that the ecommerce major is facilitating as part of its separation from payments firm PhonePe this month, people aware of the matter.
“The payouts to employees will be made by July 31… We made this communication to our employees previously,” a Flipkart spokesperson told ReTale over email without sharing further details.
Eligible former and current employees will receive $43.67, or about Rs 3,615 for each unit of Esop they hold in Flipkart as compensation for the loss of PhonePe’s value in the stock option as a result of its separation, the company had said in a recent internal note.
More than 24,000 employees, including former Flipkart and Myntra staff, will be given the cash payout based on the number of stock options they hold. ReTale has seen a copy of the note.
The payout will be “subject to applicable withholding taxes and other tax rules in respective countries of various Esop holders”, it said. Legal formalities for the payout are currently underway, it added.
The buyback is part of a $1.5-2 billion fundraise by PhonePe in a round led by Flipkart and its largest shareholder US retailing giant Walmart.
So far, PhonePe has raised about $850 million as part of the round. Out of that, private equity major General Atlantic has pumped in nearly $550 million, valuing the digital payments firm at $12 billion.
The Flipkart group of firms, which includes fashion portal Myntra, is offering existing investors and Esop holders the option to reinvest their Esop payouts in the latest round of PhonePe fundraise..
The record date for buyback entitlement has been set at December 23, 2022, and the payment would be on the basis of Esops held as on that date. The payment will be on all vested options for current and former employees, while current employees will also get benefits based on their unvested options, the internal note said.
US retail behemoth Walmart is largely financing the Esop buyback, part of which is a secondary share sale. In a secondary share sale, money goes from new investors to existing shareholders or employees – the firm itself does not receive any of the funds.
The buyback is taking place amid a global correction of tech valuations and a funding winter that has hit startups worldwide.
Flipkart’s own valuation is expected to be readjusted to about $33 billion from $37.6 billion earlier, as PhonePe will have a separate shareholding structure, people in the know of the matter had told ReTale in November.
SoftBank Vision Fund, Qatar Investment Authority, DisruptAD, Khazanah Nasional Bhd, Tencent, and Tiger Global are among Flipkart’s backers.
This is not Flipkart’s first buyback – the firm had purchased $80-85 million worth of shares from employees as part of its $3.6-billion financing round in 2021. It had also conducted another $500-million buyback during its acquisition by Walmart in 2018, but only current employees had been able to sell their vested stock options at the time.
Flipkartposted revenues of Rs 50,992 crore for 2021-22, a 34.5% jump from the previous year. At the same time, losses widened by almost 40% to Rs 3,404 crore. Expenses, including inventory costs, employee salaries and finance costs, also shot up in the period.
Flipkart group CEO Kalyan Krishnamurthy downplayed the necessity of a long-anticipated initial public offering (IPO) at The Economic Times Startup Awards in November. While acknowledging benefits like market-driven price discovery and shareholder returns that come out of an IPO, he had said: “On the flip side, you have to start sharing how you run the company and manage the many investors; you do not control the company’s future very clearly on your own. So, my philosophy is that if you do not need the first three pieces and can manage those through a private round, I do not necessarily see why we will do a public listing.”
