Flipkart employees all set to bag $800 M windfall from Walmart deal

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An email from Flipkart to its employees offered to buy part of their ESOPs at a price of $126-$128 per share.

In a letter to its employees, Flipkart announced that they would be able to liquidate part of their employee stock ownership plans (ESOPs) in the company at $126-$128 per share.

This comes weeks after US retail major Walmart completed its investment in the company. The ESOPs buying programme at the above-mentioned rate would translate into a total amount of $800 million.

ESOPs value rising

The $16 billion Walmart-Flipkart deal was finalised in August, after India’s anti-trust regulator Competition Commission of India (CCI) approved it.

As per recent filings by Walmart with the US Securities and Exchange Commission, the company intends to buy 62,42,271 shares from Flipkart’s ESOP pool of 11,947,026 shares.

The development comes close on the heels of, Flipkart Marketplace Private Limited, another Singapore based Flipkart group entity, infused Rs 34.6 billion (around $487 million) into its Indian subsidiary, Flipkart Internet.

Walmart had said earlier that if it closed the Flipkart acquisition by the end of July, the deal will impact its earnings for the year ending January 2019 by $0.25-0.30 per share and by $0.60 per share for its FY20 earnings.

As per Walmart’s estimates (and some back-of-the-envelope calculation), the Flipkart deal will have Walmart burning around $2 billion by the completion of FY20 ($0.75 billion in FY19 and $1.35 billion in FY20).

Last year, Flipkart bought back about $100 million of ESOPs after the deal with Softbank. Flipkart bought back stock options from its existing and former employees at $85.2 per unit with additional transaction fees of $3-$4 per unit. Existing employees were allowed to sell 25 percent of their vested options while former employees have been allowed to sell 10 percent as per media report.

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