Swiggy, a major player in the food delivery market and backed by influential investors like Softbank, Prosus, and Invesco, has introduced its fifth employee stock options (ESOPs) liquidity program, valued at $65 million. This initiative is designed to retain talent and strengthen loyalty within its workforce as Swiggy faces a challenging market environment and stiff competition, all while gearing up for an upcoming IPO. This latest program will allow approximately 2,000 employees across different levels and roles to liquidate their ESOPs.
Valuation Context
The secondary transaction, priced at a discounted valuation of over $9 billion, is anticipated to attract more investors as employee participation increases, according to sources familiar with the matter. In these transactions, shareholders sell their stakes to existing or new investors without bringing new capital into the company, and they are typically priced lower than primary shares.
In 2022, Swiggy raised $700 million in a funding round led by Invesco, reaching a valuation of over $10.7 billion and entering the decacorn club. The company has since seen both increases and decreases in valuation, with Invesco revising its latest valuation to $12.7 billion in April this year. This revision comes ahead of Swiggy’s planned $1.2 billion IPO, which is expected shortly.
IPO Preparations
In April, Swiggy confidentially filed its draft red herring prospectus (DRHP) for an IPO with the Securities and Exchange Board of India (Sebi), aiming to raise around $450 million in new capital and an additional $800 million through an offer-for-sale component, according to the filing. These ESOPs will allow the company to sell new shares without putting investors and other shareholders in a situation where they have to sell a significant chunk of their ownership over the company.
ESOPs Liquidity Program History
This ESOP liquidity program is Swiggy’s fifth since 2018 and the third consecutive since 2022. Together, these programs have facilitated over ₹1,000 crore in liquidity, benefiting more than 3,200 employees. In 2021, Swiggy committed to rewarding its employees for their performance over the following two years as part of its ESOP liquidation efforts.
Swiggy repurchased $50 million of shares from 2,000 employees the previous year. In 2022, it launched a $23 million ESOPs liquidity program, and in earlier years, it conducted buybacks worth $4 million in 2018 and $9 million in 2020.
Facing Market Challenges
Over recent quarters, Swiggy has encountered significant challenges, including a slowing market and more price-conscious customers. These challenges are compounded by fierce competition from other players striving to expand their user base, reduce cash burn, and achieve positive unit economics. Additionally, the company has seen several senior-level management exits in the past year.
Swiggy, founded in 2014 by Sriharsha Majety, Nandan Reddy, and Rahul Jaimini, saw its operating revenues increase by about 45% to ₹8,264 crore in FY23. However, its losses widened by 15% to ₹4,179 crore compared to the previous year.
The company, which also delivers groceries, has raised over $3.5 billion from various investors, including Prosus, SoftBank, GIC, and QIA.
Conclusion
As Swiggy continues to navigate the complexities of a fluctuating market and prepares for its highly anticipated IPO, the company remains committed to rewarding its employees through initiatives like the ESOP liquidity program. This approach fosters loyalty and retention and positions Swiggy to attract new investors and maintain its competitive edge in the dynamic food delivery sector. With a strong focus on growth and innovation, Swiggy is poised to make significant strides in the industry, benefiting employees, investors, and customers.
*Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as recommendation or investment advice by Research & Ranking. We will not be liable for any losses that may occur. Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL, and certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.
FAQs
What is an ESOP liquidity program?
An ESOP (Employee Stock Option Plan) liquidity program allows employees to sell their stock options, providing them with an opportunity to liquidate their shares for cash.
How many employees will benefit from this ESOP liquidity program?
Approximately 2,000 employees across various levels and functions will have the opportunity to liquidate their ESOPs.
What is the valuation of the secondary transaction?
The secondary transaction is valued at over $9 billion, albeit at a discounted rate.
How does a secondary transaction differ from a primary transaction?
In a secondary transaction, existing shareholders sell their stakes to new or existing investors without bringing new capital into the company. In contrast, a primary transaction involves issuing new shares to raise additional capital.
When is Swiggy planning to go public?
Swiggy is preparing for an initial public offering (IPO) in the coming months, though an exact date has not been specified.
I’m Archana R. Chettiar, an experienced content creator with
an affinity for writing on personal finance and other financial content. I
love to write on equity investing, retirement, managing money, and more.
