Swiggy launches $65 million Esops liquidity programme ahead of IPO

Food delivery giant Swiggy, backed by the likes of Softbank, Prosus, and Invesco, has rolled out its fifth employee stock options (ESOPs) liquidity programme, valued at $65 million. This move aims to retain talent and foster loyalty among its workforce as Swiggy navigates a slowing market and intensifying competition, all while preparing for a public listing.

“Rewarding employees by unlocking wealth-creation opportunities as Swiggy grows has always been a key priority for us,” Girish Menon, head of human resources at the company, said in a statement announcing the initiative on Monday.

About 2,000 employees across various levels and functions will have the option to receive liquidity for their Esops.

Discounted valuation

The secondary transaction, occurring at a discounted valuation of over $9 billion, is expected to attract additional investors as more employees opt in, according to a person familiar with the matter. 

In such transactions, shareholders sell their stakes to existing or new investors without injecting new capital into the company. Typically, secondary transactions are priced lower than primary shares.

In 2022, Swiggy had raised $700 million in a funding round led by Invesco, achieving a valuation of over $10.7 billion and marking its entry into the decacorn club. The company has since experienced both markups and markdowns, with Invesco revising its latest valuation to $12.7 billion in April this year. This revision precedes Swiggy’s anticipated $1.2 billion initial public offering (IPO) slated for the coming months.

This latest Esops liquidity programme marks Swiggy’s fifth since 2018 and its third consecutive since 2022, cumulatively enabling over ₹1,000 crore of liquidity across these events and benefiting 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.

Last year, Swiggy repurchased shares worth $50 million from 2,000 employees, and in 2022, it initiated a $23 million Esop liquidity programme. The company also conducted buybacks worth $4 million in 2018, and $9 million in 2020, Mint had reported.

In April this year, Swiggy filed its draft red herring prospectus (DRHP) for an IPO with the Securities and Exchange Board of India (Sebi) via the confidential filing route, aiming to raise about $450 million in fresh capital and another $800 million through an offer-for-sale component, as per the filing.

Navigating challenges

Swiggy has faced significant challenges over the past few quarters, including a slowing market and increasingly price-conscious customers. These difficulties have compounded in a fiercely competitive landscape, where other players are also striving to expand their user base, minimize cash burn, and achieve positive unit economics. Additionally, the company has experienced senior-level management exits over the past year.

Swiggy was founded in 2014 by Sriharsha Majety, Nandan Reddy, and Rahul Jaimini. Its operating revenues increased about 45% to ₹8,264 crore in FY23, although losses widened by 15% to ₹4,179 crore from the previous year. 

Founded in 2014 by Sriharsha Majety, Nandan Reddy and Rahul Jaimini, Swiggy delivers food and also groceries and has so far, raised over $3.5 billion from several investors, including Prosus, SoftBank, GIC, and QIA.