BharatPe launches scheme to allow employees to sell back their shares from first vesting

BharatPe has started a programme called ‘ESOP Cheque Cash Karo’ scheme. This allows employees to sell back shares from their first vesting back to BharatPe. 

The company believes this scheme is progressive during these unprecedented times. BharatPe has 6 percent (more than $25 million) of its overall equity allotted to the ESOP pool. 

BharatPe gives every employee ESOPs during their appointment. According to the startup, these ESOPs carry zero strike price. The vesting is front-ended in favour of employees with 25 percent vesting on Year 1, and thereafter 2 percent every month. The employees are not required to exercise the ESOPs on leaving and can time it with a liquidity event anytime up to five years. This allows liquidity for employees at their time of need. 

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According to KPMG, ESOPs have been used effectively to attract, retain, motivate and compensate employees. Many startups are buying back shares from employees and are rewarding them. The last time this happened was 18 months ago when RazorPay bought back ESOPs of employees. 

ESOP is an employee benefit plan under which an employee has the right to acquire shares at a discounted value without any underlying obligation to do so.

Any ESOP should meet the tax and regulatory compliance requirements. This includes devising an appropriate stock option plan, ensuring that the ESOP is compliant with the current provisions of income tax, company law, exchange control regulations, Securities and Exchange Board of India (SEBI) Act, the regulations thereunder, etc. The issues need to be specifically addressed wherein stock options of an overseas parent company are being given to the employees of the Indian subsidiary/office, or where stock options of an Indian company are given to the employees of an overseas subsidiary/office.

Ashneer Grover, Co-founder and CEO, BharatPe, said in a press release, “In the Indian ecosystem, ESOPs have been one of the most abused and misunderstood instruments. Verbal grants, back-ended vesting and last-minute changes to even documented ESOP grants have eroded employee faith in ESOPs.”

”BharatPe is pioneering a welcome change in ESOPs. BharatPe ESOP grant is like a cheque in the hands of employees. We are encouraging our employees to bank their first ESOP cheque and enjoy the value they’ve created as cash in the bank. BharatPe ESOP is not a mere promise – it is an appreciating currency. One BharatPe ESOP = Rs 7,00,000,” he added.

Geetanshu Singla, Head of Engineering, BharatPe, said, “This buyback of the ESOPs during the pandemic will support current and even ex-employees. It’s like a post-dated cheque. This is the first and last time I’m exercising my stock options and will hold on to them, they will be the most valuable asset that I hold."