Zomato rival Swiggy launches fifth ESOP liquidity programme worth $65 million

Bengaluru-based food delivery major Swiggy, which battles with Deepinder Goyal-led Zomato, has announced its fifth employee stock options (ESOPs) liquidity program, valued at $65 million.

The program allows around 2,000 employees across various levels and functions to receive liquidity for their ESOPs.

Swiggy aims to retain talent and foster loyalty through this initiative. "Rewarding employees by unlocking wealth-creation opportunities as Swiggy grows has always been a key priority for us," said Girish Menon, head of human resources at Swiggy.

“Employees owning shares of their company creates alignment of incentives and a sharp focus on collaborative excellence, which is a virtuous cycle that we believe in and espouse. As we approach the milestone of a decade of consumer love for Swiggy, the latest ESOP event is an acknowledgement of our employees' contributions and our commitment to sharing Swiggy’s success and growth with them,” Menon added.

The secondary transaction is priced at a discounted valuation of over $9 billion, which is lower than the primary shares. This means shareholders sell their stakes to existing or new investors without injecting new capital into the company.

In 2022, Swiggy raised $700 million in a funding round led by Invesco, achieving a valuation of over $10.7 billion.

In April this year, Invesco revised Swiggy's valuation to $12.7 billion. The current ESOP liquidity event is expected to attract additional investors as more employees opt in.

Swiggy's ESOP program history

Swiggy's latest ESOP liquidity program is its fifth since 2018 and its third consecutive since 2022. Cumulatively, these programs have enabled over Rs 1,000 crore of liquidity and benefited more than 3,200 employees. 

In 2021, Swiggy committed to rewarding its employees for their performance over the next two years as part of its ESOP liquidation exercise.

In previous years, Swiggy repurchased shares worth $50 million in 2022 and initiated a $23 million ESOP liquidity program. Earlier buybacks included $4 million in 2018 and $9 million in 2020.

Swiggy upcoming IPO

Swiggy has reportedly filed its draft red herring prospectus (DRHP) confidentially with the Securities and Exchange Board of India (SEBI) in preparation for an initial public offering (IPO). The company aims to raise about $450 million in fresh capital and another $800 million through an offer-for-sale component.

The IPO is expected to be valued at approximately $1.2 billion. Swiggy’s backers, including Prosus, SoftBank, DST Global, Accel Partners, and Elevation Capital, are likely to sell their holdings in the offer-for-sale component of the IPO.

Swiggy has faced significant challenges over the past few quarters, including a slowing market and increasingly price-conscious customers.

The competitive landscape has intensified, with other players striving to expand their user base and achieve positive unit economics. Additionally, Swiggy has experienced senior-level management exits.

Despite these challenges, Swiggy's operating revenues increased by about 45% to Rs 8,264 crore in FY23, although losses widened by 15% to Rs 4,179 crore from the previous year.