India sees more startups encashing Esops in 2024 in pre-IPO, secondary deals

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Subscribe to enjoy similar stories. Employees of unlisted startups made a tidy sum from their ownership of employee stock options (Esops) in 2024, with 26 such companies buying back the Esops in pre-listing and secondary transactions.

Data analyzed by equity management platform Qapita showed the number was 19 in 2023, but was higher at 37 startups each in 2021 and 2022. “We have seen increased activity surrounding Esop liquidity in 2024 vs 2023," Qapita’s senior vice president Vikram Sivaraman told Mint in an email.

“We believe this has been spurred by the stellar performance of the IPO market with 12 startups successfully listing during the year." For instance, food-delivery giant Swiggy carried out its fifth buyback, worth $65 million, in July, ahead of its November initial public offering (IPO). Other IPO-bound startups to launch similar offerings were home services provider Urban Company (encashed Esops worth $63 million in July), software as a service (SaaS) firm Whatfix ($58 million in October), and e-commerce startup Meesho worth $25 million in its fourth and largest round in March.

Also read | Mint Explainer: The budget, buybacks, and Esop taxation While Esop buybacks help companies reward and retain employees, they also allow senior management to book profits at a later stage, especially during public listings. Sivaraman added that pre-IPO investment activity has also increased, especially in startups that plan to list in the next two to three years.

“Most companies allow their employees to sell a portion of their Esops as part of such pre-IPO rounds," he said, adding that he expected the trend to continue in 2025 with more startups going public. To be sure, late-stage funding, too, saw a revival in 2024, with