ASIA PACIFIC Chapter

Unacademy recently cut the ESOP exercise window for former employees from 10 years to just 30 days, sparking legal and ethical concerns over fairness, as employees may lose practical opportunity to realize wealth from their options. The change exposes ex-employees to immediate tax liabilities on potentially illiquid shares, while investors with preferred stock retain protections, leaving employees at the bottom of the payout hierarchy. This controversy highlights broader risks in startup ESOPs, emphasizing the importance of legal safeguards, careful evaluation of exercise terms, and awareness that paper value may not translate to real financial benefit.

Urban Company shareholders overwhelmingly approved five special resolutions, including ratification of the 2015 and 2022 Employee Stock Option Plans, their extension to group companies, and amendments to the Articles of Association, with support ranging from 96.79% to 97.01%. The strong backing reflects confidence in the company’s employee retention strategies, group-wide alignment, and corporate governance. These actions signal shareholder trust and reinforce Urban Company’s focus on talent motivation and long-term strategic growth.

Employee Stock Option Plans (ESOPs) are gaining popularity in India, driven by a booming IPO market and increased interest in equity-based employee compensation, with 2024 raising $12.2 billion compared to $6.4 billion in 2023. ESOPs allow eligible employees, excluding promoters and certain directors, to purchase company shares at a discount, and can be structured through either a direct or trust route, depending on the company’s size and listing status. While they offer long-term financial upside and align employee interests with company performance, ESOPs require strict compliance with regulatory frameworks like the Companies Act, SEBI regulations, and tax rules, especially upon exercise and share allotment.

In January 2025, several prominent companies, including Yes Bank, Swiggy, and Zensar Technologies, allocated significant equity shares under their Employee Stock Ownership Plans (ESOPs), highlighting a growing trend of rewarding employees. As the Indian budget approaches, there is heightened anticipation within the startup and venture capital community for tax rationalization to alleviate double taxation on ESOPs, which could make them more attractive. The shift to a more favorable tax environment for ESOPs is seen as a key strategy to incentivize talent retention and boost India's startup ecosystem.

As India's 2025 union budget approaches, investors are calling for tax relief on Employee Stock Ownership Plans (ESOPs) to make the startup ecosystem more employee-friendly, emphasizing the need to eliminate double taxation. Currently, ESOPs are taxed both when exercised and when shares are sold, which discourages employees from fully benefiting from these options. Investors argue that taxation should only occur when a gain is realized, aligning India's tax policy with global standards and fostering a more attractive environment for talent retention in emerging sectors like AI and spacetech.

One97 Communications, the parent company of Paytm, has issued 2.44 lakh equity shares to employees under its ESOP schemes, increasing its paid-up capital to Rs 63.73 crore. Paytm’s shares have surged 185% over the past six months, reaching a 52-week high of Rs 967.10, driven by resolved regulatory challenges and progress on key approvals like a payment aggregator license. Additionally, Paytm introduced UPI Lite for seamless small transactions, and UBS Securities raised its price target for the stock to Rs 1,000, reflecting significant improvements in the company’s outlook.

Swiggy's IPO, valued at ₹11,300 crore, has unlocked ₹9,000 crore worth of employee stock options (ESOPs), creating significant wealth for around 5,000 employees, with nearly 500 becoming 'crorepatis.' Employees can sell their shares a month after listing, thanks to a regulatory exemption, while the IPO was oversubscribed 3.59 times, driven by institutional investors. With its ESOP program spanning three plans since 2015, Swiggy's founders and top management collectively hold ESOPs worth ₹2,600 crore, emphasizing the company's commitment to rewarding employee contributions.

 

Mphasis Limited announced the granting of 25,000 stock options under its ESOP 2016 and 12,000 restricted stock units (RSUs) under its RSU Plan 2021 to eligible employees, effective November 7, 2024, as approved by its ESOP Compensation Committee. The stock options have an exercise price of ₹2,900, with equal vesting over five years and a 60-month exercise period, while the RSUs, priced at ₹10, follow a progressive vesting schedule of 10%, 20%, 30%, and 30% over five years, catering to both Indian and US-based employees. These equity grants are administered through the Mphasis Employees Equity Reward Trust, ensuring compliance with SEBI regulations, and the announcement was officially submitted to the BSE and NSE by Senior Vice President and Company Secretary Subramanian Narayan