Thanks to ESOPs, these 35 non-founder startup executives are now worth over Rs 100 crore

The latest IPO and investment boom in the new-age companies not only helped transform the economy but also created a new class of moneyed non-founder employees with a significant stock option haul.

As many as 35 non-founder executives now own stock options worth over Rs 100 crore in various recently-listed and privately-held companies, according to executive search and advisory firm Longhouse Consulting. This small group consists of employees who own significant ESOPs in recently-listed companies such as Nykaa, Zomato, PolicyBazaar, and Paytm and private companies such as Flipkart Group, Ola and Byju’s.

Record investments totalling $36 billion found their way into Indian startups this year, which in turn also increased the focus on employee stock options programmes for employees of such companies. Startups, in general, are known to provide a high-growth environment to employees and employee stock options is a major component that such companies use to lure the talent.

According to Longhouse report quoted on in an Economic Times report, crorepati employees are expected to increase to 100 by the end of the next year.

Other than significant hikes, ESOPs, as part of compensation, is also likely to emerge as an effective barging chip during new hiring interviews for such high-growth companies.

It’s not just money on paper, a lot companies initiate buybacks resulting in a windfall for their employees. According to an ET report last month, as many as 40 startups bought back shares worth Rs 3,200 core from employees recently.

Harshil Mathur, co-founder and CEO of Razorpay told ET that contrary to the popular belief, employees actually stay longer after initial buybacks and do not sell their holdings in a rush.

The payments company Razorpay conducts at least one buyback per year. In March 2021, it bought back shares worth $10 million and even younger employees were eligible to participate.

Mathur added that employees realise that salary hikes are not enough to make a significant impact on their lifestyles and increasingly opt for compensation structures that offer ESOPs. He, however, cautioned that workers need to formalise the agreement in writing at the time of taking up the job offer.

PhonePe gave ESOPs worth Rs 1500 crore to its employee in 2020 with the minimum package being Rs 3.5 lakh. Sameer Nigam, cofounder and CEO of PhonePe told ET that keeping staring ESOP packages at a minimum of Rs 3.5 lakh enables the employees to participate in the wealth creation opportunity.

Other than PhonePe and Razorpay, companies like Udaan, Flipkart Group, UpGrad, Swiggy, and Spinny among others have made Esop buybacks this year.