Companies

E-commerce portal Hopscotch offers to buy shares from employees

Priyanka Pani Mumbai | Updated on February 14, 2019 Published on February 14, 2019

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20 employees have opted to encash their ESOPs, says company.

At least 20 current employees at Hopscotch, a online kids fashion portal, will become “crorepatis” or millionaires this month as the start-up plans to buyback ESOPs (Employee Stock Option Plan).

The scheme was offered to about 100 existing employees, however, only 20 of them have opted to encash their ESOPs, an employee benefit plan which offers employees an ownership interest in the organisation.

ESOPs are are issued as direct stock, profit-sharing plans or bonuses and is very common phenomenon with start-ups as ESOPs act as a tool to contain high attrition and retain high-quality talent.

However, start-ups buyback those shares when the founders want to increase their stakes before a large funding round or when the company is getting acquired or going public.

Rahul Anand, Founder of Hopscotch, told BusinessLine that there is no immediate plan of fund raising or acquisition, even though the start-up has been approached by several leading consumer brands.

“We have a very large ESOP pool at Hopscotch and we gave every single person the right to decide whether they would like to keep or sell this. It helps employees view ESOPs as a credible alternative to cash compensation, one that can often result in big financial rewards,” Anand said, adding that unlike other start-ups, the ESOP shares are offered at a very early stage and will be done every year.

Started in 2012, Hopscotch is backed by venture investors including Eduardo Saverin , co-founder of Facebook, Singapore-based LionRock Capital, Wei Yan of Diapers.com and Toivo Annus, co-founder of Skype. With a triple digit CAGR, the company is expecting a turnover of ₹500 crore in FY19.

With about three million active users, Hopscotch is the only single-brand online kids brand that sells products for kids aged between 0 years to 14 years. It is not a marketplace, but a brand and hence has been able to keep its cash burn low by having a control on its discount strategy. It also enjoys high margins of 60-70 per cent. According to Anand, the marketings costs have decreased by 20 per cent every year.

In the last six months, over half a dozen start-ups, including Oyo, UrbanClap, Rivigo, RazorPay, Swiggy and Flipkart among others, have offered to buyback the ESOPs from their current employees in a bid to stop attrition and retain talent.

Last year, Paytm and Ola had also offered their respective employees the option to liquidate their shares. Such events also indicate a general rise in exits at start-ups.

E-commerce giant Flipkart had the highest ESOP buyback programme last year after its acquisition by Walmart that bought 77 per cent of the company. Other companies are also playing catch up by facilitating their first-ever ESOP repurchases this year.

Published on February 14, 2019
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