Flipkart has initiated a cash payout amounting to USD 700 million as compensation to its employees following the separation of PhonePe, marking the largest one-time cash payout in the history of Indian startups. CEO Kalyan Krishnamurthy stated in an internal email that each vested ESOP (Employee Stock Ownership Plan) would receive USD 43.67 as compensation, with eligibility based on the record date of 23 December 23, 2022. Flipkart’s board of directors announced the complete separation of the PhonePe business by selling its entire shareholding in December 2022.
PhonePe, since its separation, has successfully raised USD 850 million in primary capital during the current funding round, with expectations to reach USD 1 billion. The fresh funds were secured at a pre-money valuation of USD 12 billion. While Flipkart did not disclose the exact number of employees eligible for compensation, a previous report estimated that over 24,000 employees, including former Flipkart and Myntra staff, would benefit from the cash payout.
The startup ecosystem in India witnessed a decline in buybacks, liquidity, or payout programmes following a record buyback of employees’ stock in 2021. According to data from Fintrackr, around 25 startups announced ESOP buybacks worth USD 200 million in 2022, compared to USD 440 million in ESOP buybacks in 2021. Flipkart led the way with an USD 80.5 million ESOP buyback in 2021.
In 2023, only Winzo, Tredence, and Sunstone announced their employees’ stock buyback programmes, totaling nearly USD 35 million. This latest buyback from Flipkart brings positive news amid uncertain valuations and rare large-scale ESOP buybacks. As one of the pioneering and most successful startups in terms of ESOPs, Flipkart’s initiative benefits thousands of employees. However, it also highlights the need for other unicorns to improve their approach to negotiating and fairly distributing ESOPs to ensure employees don’t miss out on their benefits.