ESOP Trends at Bandhan Bank, CriticalRiver, and CarTrade in April 2024

Welcome back to the latest edition of Fables of ESOPs. While last month saw a jump in ESOP related activities across companies as they were all trying to meet critical deadlines by financial year end, the trajectory of growth in the ESOP world follows the trend of Pre-March months. This may be due to several reasons, like the global slowdown in the economy and weak investor sentiments, but a large share of this goes to the evolving political landscape of the country.  

With elections right around the corner, companies would ideally want to wait to understand which political regime will take its seat in India and the changes they will unfold in the financial market before making any big financial decisions. Hopefully, post-elections, we will see a jump in the Stock Options Market and employee ownership will gain renewed importance.  

Till then, let’s look at the major developments that happened this month:  

The Sleep Company Rolls Out Its Second ESOP Buyback Worth INR 2.4 Cr

The Sleep Company, headquartered in Mumbai, has announced that its current buyback, valued at INR 2.4 crore, will provide benefits to 105 employees, with half of them being women, according to a company statement.

Founded in 2019 by Priyanka Salot and Harshil Salot, The Sleep Company is a comfort-tech startup specializing in innovative products such as smart mattresses, chairs, comforters, recliner beds, and pillows, all featuring its patented SmartGRID technology.

Last year, the company introduced the initial phase of its Employee Stock Ownership Plan (ESOP) program, amounting to INR 83.47 lakh and benefiting approximately 62 employees. The company's mission is to enhance consumers' sleep and sitting experiences.

Bandhan Bank Expands ESOP Program

Bandhan Bank allocated 249 equity shares as part of its Employee Stock Ownership Plan (ESOP). Following this allotment, the bank's issued and paid-up equity share capital has risen from Rs. 16,10,96,97,480/-, consisting of 1,61,09,69,748 fully paid-up equity shares of Rs.10/- each, to Rs. 16,10,96,99,970/-, comprising of 1,61,09,69,997 fully paid-up equity shares of Rs.10/- each.

CriticalRiver Introduces ESOPs for All Employees

In a move aimed at fostering employee loyalty and mitigating turnover, CriticalRiver, a technology solutions company, has introduced a bilateral ESOP (Employee Stock Option) policy, granting shares to all its employees. The firm, established 10 years ago and operating across nine global locations with over 1,000 employees, has decided to allocate 100 shares to each employee annually.  

Notably, there are no restrictions imposed on the stocks obtained through this program; they are fully vested, providing employees with complete ownership without any conditions. Additionally, the company plans to offer ESOPs based on employee performance.

The company referred to an analysis from Harvard Business Review, stating that the companies possessing a minimum of 30 percent employee ownership tend to demonstrate higher productivity, achieve accelerated growth, and exhibit a reduced risk of closure in comparison to similar businesses. The company also announced its plan to hire 150-200 employees in the next six months for its India operations.  

ESOPs for State-Bank Staff, Decision to be Taken Post-Election  

The government has reopened discussions with public sector banks (PSBs) regarding the provision of stock options to qualified employees, reigniting optimism for this longstanding request from the lenders. While the proposal to implement employee stock ownership plans (ESOPs) has been inactive for some time, it may gain traction following the Lok Sabha elections, according to sources familiar with the matter.

The framework will assess diverse factors affecting state-owned banks, with the implementation of employee ESOPs representing a longstanding request from PSBs. They contend that this measure will aid in the recruitment and retention of talent amidst stiff competition from private counterparts. Experts suggest that stock options, proven effective in the private sector, could yield comparable advantages within the PSU framework.

CarTrade Expands Employee Stock Option Pool

CarTrade, an Indian auto marketplace, has expanded its employee stock option plan (ESOP) pool by allotting 3.04 Lakh additional shares to eligible employees under its ESOP 2011, ESOP 2014, and ESOP 2015 schemes.  

This has increased the company's paid-up share capital from INR 46.8 Cr to INR 47.19 Cr. The exercise price per share for stock options under ESOP 2015 is set at INR 472, while the prices for ESOP 2011 and 2014 are INR 21 and INR 34 respectively.

This move is aimed at attracting, retaining, and motivating the company's employees, whose contributions are important to its success.

In conclusion, as we await post-election outcomes and potential policy changes, there is optimism for a resurgence in ESOP adoption across sectors. Employee ownership not only fosters loyalty and productivity but also strengthens organizational resilience in today's dynamic business environment. Each company's focus on ESOPs underscores the growing recognition of their significance in driving employee engagement and organizational success.

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