flipkart: PhonePe Esop buyback: Flipkart makes $700 million payout to employees

Employees of ecommerce major Flipkart have received their payments from a $700 million employee stock option (Esop) buyback today, group CEO Kalyan Krishnamurthy told his staff in an internal email–reviewed by ETtech.

“…the BoD (Board of Directors) had decided to pay $43.67 (Rs 3,615) as compensation for each Esop (vested options for eligible current and former stakeholders and unvested options only for eligible current stakeholders) as of the record date of December 23, 2022”, the latest email from Krishnamurthy further added.

The details of individual payments would reach employees by next week, the statement from Krishnamurthy added.

More than 24,000 individuals, including former Flipkart and Myntra employees, are eligible for payments from the buyback.

Also read | Flipkart-PhonePe spilt: Flipkart staff to receive $700 million cash payout this month

The ‘one-time’ payment to Flipkart employees is part of PhonePe’s funding round after the payments firm separated from its erstwhile parent Flipkart group.

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Walmart will still be the majority shareholder in PhonePe but the employee shareholder group–which held the stock options in Flipkart– is selling the options and Walmart is buying back these Esops as part of the $1.5-2 billion funding in PhonePe at a pre-money valuation of $12 billion.

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PhonePe founders Sameer Nigam and Rahul Chari also would make about $20-25 million each, ET had reported in February.

Several senior executives of Flipkart would be making top-dollars out of this payment which would lead to significant investments in real-estate, luxury purchases.


“There has certainly been good work across the business, and I want to thank all the teams for their consistent and dedicated efforts in prioritizing impact and value”, Krishnamurthy said in his email.

ET first reported late last week on the buyback payment being made by the end of this month. The payout will be “subject to applicable withholding taxes and other tax rules in respective countries of various Esop holders”, an earlier Flipkart internal note had said about the buyback, adding that legal formalities for the payout were currently underway.


“Employee group shareholders are likely to sell their shares to Walmart as investing in PhonePe in a new round would also incur a significant tax payout for paper money gains in PhonePe as opposed to a cash payout…,” ET had reported in November explaining why the employee group chose to sell during this transaction.

The $700 million buyback is the largest for a new-age internet firm in the country.

It is part of a $1.5-2 billion fundraise by PhonePe in a round which is seeing investments from Walmart, General Atlantic, Tiger Global and others.

Esops are used as a retention tool and the latest payout would be significant when new funding deals have come to a screeching halt across startups in India. Several well funded startups like Byju’s, Unacademy, and others have been firing thousands of employees.

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.

PhonePe has already 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.

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 ET in November.

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