In Q1, Zomato’s ESOP costs rose by almost 200% to Rs 161 crores, from Rs 84 crore in the corresponding period of the prior fiscal year. The administration of Zomato expects additional rates rise in ESOP during FY25.
Recently, Zomato requested its shareholders’ nod for the new Employee Stock Option Plan (ESOP) which aims to allocate 182 million shares worth more than INR 35 billion at current market prices. This happened as their stock price went down notably by as much as six percent during early trade on May 14 due to anticipated cost pressure coming from the company’s ESOP.
Zomato incurred these expenses in relation to the Blinkit leadership team and key employees now included in the ESOP program although these are non-cash. Post announcing Q4 net profit of INR 1.75 billion, a significant recovery from a loss of INR 1.88 billion in the same quarter last year, the management revealed this during an earnings call with analysts. Also, the company’s revenue grew robustly by 73% YoY to INR 35.62 billion.
New ESOP Plan
The new ESOP plan that will be issued over time if approved by shareholders is expected to be disbursed among employees at some point moving forward. Through this measure, Zomato intends to instill a culture of innovation and long-term thinking within its workforce thus improving performance and shareholder value.
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Though concerned over this initial market reaction; total employee costs (cash as well as ESOP charges) are projected to decline from 29% revenues in FY22 to just about 12% revenues in FY24 according to Zomato management still optimistic about it. They anticipate that this trend will continue and eventually enhance longer term financial health for Zomato.
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