Swiggy founders have played it smart before their IPO:
Co-founders ‘Sriharsha Majety’ and ‘Nandan Reddy’ have sold shares of their company from July to September 2024 through secondary transactions. While Majety offloaded a stake worth Rs 196 crore ($23 million), Reddy sold shares amounting to Rs 101 crore ($12 million) as per the DRHP. Isn’t that a bad signal?
NO, it’s all well planned!
As per Swiggy’s ESOP Plans of 2021 and 2024 disclosed in DRHP, both the co-founders have been issued ESOPs of total ~5.5 Crore equity shares in the company which at current secondary market value stands at over a whopping Rs 2,200 Crores!
In India, ESOPs are taxed twice – firstly when esops are getting exercised, the difference between the exercise price and the fair market value is taxable as part of your salary, and then at the time of sale of those ESOPs converted shares on the capital gain, if any.
The first level of taxing can be treacherous for most founders as you have to pay the tax as per your income tax bracket (~30%) in a given year even if you didn’t have any major cash inflow, as all you have in hand is ESOPs with ongoing vesting period.
This is exactly the reason why Policybazaar’s founders Yashish Dahiya and Alok Bansal had to sell their own shares in open market in 2022 and 2024 in order to generate enough liquidity to pay tax on the ESOPs worth thousands of crores which their company has issued to them.
So Swiggy founders have done the right thing by generating decent liquidity before hand so that they aren’t forced to sell their own holding post IPO and face any backlash.
Smart move!
More on ESOPs at Finding Outperformers! (pc: Business Insider)
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