In a move which could be the very first by an Indian new-age company, Flipkart has sold a marginal stake in its employees trust fund to some high net-worth individuals for around Rs. 180 to Rs. 240 crore. As per a report from ET, the move was aimed at talent retention by the company.
Such a move by the company gives employees who are holding stock options, a way to monetize them. Usually, the employees would not be able to do so if the company is not listed.
Flipkarts spokesperson, in an email response to ET, said,
At Flipkart, we believe the reason for our remarkable growth has been our people who have demonstrated immense ownership and have consistently gone way beyond the call of duty.
The employee trust is a structure to facilitate employee liquidity across all levels depending on the amount of vested options. This is a repeatable structure and we do intend to use it as we go along at least on an annual basis.
Employee stock options, or esops, ranges from 30 percent to 70 percent of compensation. The companies use this as a way of rewarding employees and to ensure that valuable employees stays at the company.
ESOP is an employee-owner program that provides a company’s workforce with an ownership interest in the company. They are part of employees’ remuneration for work performed. Shares are allocated to employees and may be held in an ESOP trust until the employee retires or leaves the company.
The dividend that accrues is used for the welfare of employees. It can also serve as a defence against takeover attempts. ILFS Group has the ILFS Employees Trust that owns a 13 per cent stake in the company. Larsen & Toubro Ltd has an employee trust fund that owns a 17 per cent stake in the company.
The e-commerce industry in INdia is currently worth $17-billion and is expected to grow to $50 billion by 2020. It is expected to create a total of more than 50,000 jobs in the next few years.
For the financial year that ended in March, Flipkart posted a revenue of Rs. 659 crores, thus registering a massive four times of the 179 crore revenue posted last year. The net worth of the company also jumped 12 times from Rs. 415 crore last year to Rs. 4819 crores, signalling better financial health.
Flipkart is currently the India’s largest e-commerce company. It has raised more than $3.15 billion from 16 investors, including Tiger Global and Steadview Capital. The company was valued at $15 billion in its last round of funding.