Flipkart to Offer $700 million ESOP Payout After Spilt with PhonePe

Employee stock option (ESOP) repurchase proceeds from the employees of online fashion retailer Myntra and e-commerce behemoth Flipkart will reach $700 million (about Rs 5,780 crore). Walmart is paying out to make up for current and former workers' share value losses due to the division of Flipkart's subsidiary for digital payments, PhonePe. In 2018, Walmart bought the majority of Flipkart.

For each share of Esop they own in the company, qualified current and former employees would get £43.67 (about Rs 3,615) from Flipkart. This payment is intended to make up for the separation-related decrease in the value of PhonePe's stock option. More than 24,000 workers, including former employees of Flipkart and Myntra, will get cash payouts depending on their Esop holdings.

According to the notice, the dividend will be subject to any applicable withholding taxes and other tax regulations in the different countries of the Esop holders. The business has already started the legal procedures necessary for the compensation.

This buyback is part of a more comprehensive fundraising effort by PhonePe, backed by Flipkart and Walmart, a key stakeholder, to raise £1.5-2 billion. PhonePe has raised about £850 million to date, including almost £550 million from the largest private equity firm, General Atlantic. The worth of the digital payments company after this investment is £12 billion.

When will the sum be made available?

According to rumours, these payments will be made by 31 July 2023. According to reports, the HR section of the company wrote a letter announcing that qualified current and past employees will receive Rs 3615 ($43.67) for each unit of Esop held on Flipkart. However, to receive payments, specific tax-related permissions must be obtained. Around 25,000 former and current employees would reportedly profit from Flipkart's one-time cash settlement. Flipkart's final buyback before its eagerly awaited initial public offering (IPO) is believed to be this financial payment.

PhonePe and Flipkart parted ways

Flipkart purchased the digital payments company PhonePe in 2016, and it remained a part of Flipkart until December 2022, when both businesses declared their separation. But Walmart is still the parent firm of both Flipkart and PhonePe and will continue to have a controlling stake in both companies. After being purchased by Flipkart, PhonePe acquired full Indian corporate citizenship. PhonePe raised over $800 million in capital this year, including $550 million from the global growth equity firm General Atlantic. Ribbit Capital and Walmart are some additional investors.