Ribbit Capital and Sequoia Capital, the two marquee venture capital firms that led a $75 million equity financing round in Bengaluru-based payment solutions company Razorpay in June, have purchased the stocks, worth about $4 million (about Rs 29 crore), of employees across designations, including entry-level staff.
“We plan to do this periodically almost every year, or after each financial round undertaken by the company. This is an outcome of that. We have negotiated the best price for them, almost at the value of the last round,” Harshil Mathur, chief executive of Razorpay, told ET.
Razorpay’s valuation was estimated at about $450 million in June, and while the company has not disclosed the same, the latest secondary transaction, according to the CEO, has been done at a 15% discount, valuing the employee stock options at over $380 million. According to Mathur, 400 employees are eligible to participate in the stock buyback programme, and Razorpay has allowed all employees who have been with the company for over a year, including those that have left, to participate in the program, allowing them to sell one-third of their vested stocks.
This is also the second time that the company’s employees have cashed in on company-issued stock. In November last year, Tiger Global, an existing investor in the company, snapped up shares at a 50% premium to the valuation it scored — about $100 million — in its January 2018 funding round.
“Esops shouldn’t just be retirement money…Our view always has been that people don’t have to wait for large liquidity events to get many out. Esops shouldn’t be just value on paper,” Mathur said.
Separately, Moglix, which counts Accel Partners, Sequoia Capital and Tiger Global Management, among others, has undertaken a Rs 5-10 crore stock buyback from eligible employees — numbering about 25 — led by the Noida-based company, along with certain investors.
“We, as a company, have a policy where we issue and even post-departure, employees can hold on to their vested stocks, without incurring tax liabilities,” Rahul Garg, CEO of Moglix, told ET. According to him, Moglix, which has about 680 employees, has allowed employees ranging from deputy managers to senior executives, to participate.
“What we have realised is that once employees have crossed Rs 8-10 lakh in salaries, for them the valuation becomes more important, and they prefer cash-in-hand than compensation,” he said.
While the overall value of the buybacks may be small, for startup employees across ranks, even those that are working with companies that have raised significant amounts of capital, earning cash windfalls from stock that they hold, has been rare in India, given the paucity of initial public offerings and mergers and acquisitions.
In most cases, it has mostly been startup founders or CXO-level executives that have harvested windfalls on such occasions.