This document discusses the history and impact of employee stock ownership plans (ESOPs) introduced by Indian IT companies like Infosys in the 1990s. It notes that while Wipro introduced ESOPs earlier, Infosys helped popularize the concept after its IPO created over 2,000 rupee millionaires among employees. The tax benefits of ESOPs at the time made them very attractive. Infosys' success with ESOPs helped drive growth in the Indian IT industry and democratized wealth creation.

2. ESOP : WHAT ? WHY ? HOW ? . . .
• EMPLOYEES STOCK OWNERSHIP PLAN – An
option is given to employees to acquire equity shares
in the company after a future date but price is fixed in
advance.
• They employee has the choice to decide whether to
acquire the share or not. Employee typically acquires
shares through selective plan or all-employee plan ,
selective plans are typically made available to senior
executives.
• After the lock-in period (if any) the employee can sell
the shares in the market and realize the gain.

3. • The employee holding the stock options do not have the
right to receive dividend or vote or enjoy any other
privileges of a shareholder till the shares are actually
issued on exercise of option and the completion of
vesting period.
• The options granted to employees are not transferrable
to any other person.
• The objective of issuing ESOP is to: Provide incentive
to attract, retain and reward employees of the
company. Motivate employees to contribute to the
growth and profitability of the company.

4. "A STOCK OPTION IS NOT A SHARE IN THE COMPANY. IT REPRESENTS THE OPPORTUNITY TO
PARTICIPATE IN THE COMPANY’S SHARES AT SOME POINT IN TIME.”

5. IMPORTANT TERMS-
STRIKE PRICE
VESTING

6. VESTING TYPES:-
1. CLIFF VESTING
2. GRADED VESTING
3. ACCELERATED VESTING

7. EXERCISING THE OPTION:-
CASH AND CASHLESS EXERCISE

9. SO HOW DO YOU CONVERT THE VESTED
OPTIONS INTO SHARES YOU OWN?
• You need to ‘exercise your option’, which means you buy shares of the company at the strike price
(explained in the beginning). Say 2,500 stocks have vested and the strike price is Rs 1. Then you need to
pay the company Rs 2,500 to get the shares in your name. This is called a cash exercise.
• Here’s a simplified illustration of how tax is worked out:
You got 10,000 ESOPs when you joined in January 2015 The value of each stock in January 2015 is Rs 10;
you got it for Rs 1 In 2016, 2,500 stocks got vested and you paid Rs 2,500 to get them as shares in your
name.
But the value of each share is now Rs 100 as the startup has raised funding at that valuation. So your gain is
Rs 99 per share, which translates to 99X2,500 = Rs 2,47,500. Now you have to pay tax on this.
At 30% the tax amount comes to Rs 74,250. Tax is fine if you are a senior employee and earn a hefty salary
but if you are a junior employee tax could pose a problem if it turns out to be a big amount.

10. A BUMPER DIWALI FOR FLIPKART
EMPLOYEES: BOARD APPROVES $100 MN
ESOP REPURCHASE PLAN
(2017)
• The ESOP Repurchase Plan Could Benefit Close To 6,000 Flipkart Employees
• The board of India’s most famous ecommerce startup has approved a plan to repurchase employee
stock options in a $100 Mn ESOP repurchase plan.
• The move could benefit close to 6,000 current and former employees at Flipkart.

11. FLIPKART OFFERS TO BUY BACK 30%
ESOPS VESTED WITH FORMER EMPLOYEES
(2018)
• While SoftBank explores its options to retain its position in the Indian ecommerce market after
the Flipkart-Walmart deal, Flipkart is also gearing up for the likely developments resulting from
the deal. In an email to some of its former employees, the Indian ecommerce unicorn said that it
would repurchase up to 30% of its former employees’ vested ESOPs (employee stock ownership
plan) at a share price ranging from $125 to $129.
• According to reports, “Over 30% of the vested options can be liquidated on or about the date of
the closing of the proposed transaction. The liquidation of options would be at a price reflective of
the transaction price, in the range of $125-$129 per option.”

12. WALMART SET TO BUY $800 MN WORTH
FLIPKART ESOPS
2018
• As the company stated, the current employees will be allowed to liquidate their employee stock
ownership plans (ESOPs) at $126-128 a unit, depending on the charges applicable.
• It is to be noted that Walmart is obligated to purchase 6,242,271 shares from Flipkart’s ESOP pool of
11,947,026 shares, according to a recent filing by the global retail giant with the US Securities and
Exchange Commission.
• With this effect, Walmart will purchase from Flipkart employees ESOPs worth nearly $800 Mn.
Essentially, Flipkart’s total Esops are worth $1.5 Bn based on the per-share purchase price.

13. FLIPKART APPROACH TO ESOPS SO FAR
• In May 2018, Flipkart reportedly set aside $500 Mn for the repurchase of the ESOPs.
• Earlier, in October 2017, Flipkart’s board had approved a $100 Mn ESOPs repurchase programme
wherein employees would be able to sell 25% of their vested shares and former employees would be
allowed to sell 10% of their stake; this process was completed in December.
• The company had also earlier set aside $400 Mn to buy back shares of minority investors in an
attempt to revamp itself as a private limited company (Flipkart Pte Ltd) in Singapore.

14. FLIPKART ISSUES $100 MN WORTH ESOPS
TO SENIOR STAFF: REPORT 2019
• Ecommerce giant Flipkart has issued a $100 Mn (INR 700 Cr) worth employee stock ownership
plan (ESOPS) for its senior and middle-level staff across Flipkart and Myntra-Jabong, in a move
to hold onto its key talent.
• Employees have been allotted these new shares at a price of $125-$130 per unit and will see 25%
of their stock vest after a year. Following this, monthly vesting will continue for three years.
• According to sources, the company is also considering an IPO in 2021 to have possible liquidity
options besides share buyback by the parent company.
• In May 2018, Flipkart had brought shares from a set of existing investors for $350 Mn in order to
reclaim its status of a private company – Flipkart Pte Limited.

15. FLIPKART EMPLOYEES CAN NOW CASH OUT
10% OF ESOPS (2019)
•A Livemint report, which cites an email by Flipkart chief executive Kalyan
Krishnamurthy on August 29, said that the company has received the board
approval for the same. The employees will be able to sell the options allotted to
them at $125-130 apiece, the email added.

17. ABOUT THE COMPANY
• One of India’s biggest payments players started the fiscal asking the public to ‘Paytm Karo’.
• With digital payments in the spotlight after demonetisation of high-value currency notes in
November 2016, Paytm enjoyed the fruits of the digital revolution and is now well on its way to
further consolidate its position as it enters the new fiscal.
• FY 2017-18 was the year of reckoning for Paytm with the payment major doubling up from just a
wallet to a full stack financial services and commerce player.
• Paytm has certain verticals like movies, vehicles and event ticketing's and now has come up with
financial services like Paytm banks and Paytm Gold

18. SEVERAL PAYTM STAFF BECOME
CROREPATIS BY EXERCISING THEIR ESOPS
(2017)
• Taking advantage of the recent spike in valuation, several employees of One97 Communications,
which owns digital payments providing company Paytm, made a killing by selling shares to the tune of
around Rs 100 crore
• These employees saw this as an opportune time to use their employee stock options, especially, after
Paytm's valuation reached $4.8 billion last year thanks to growing business and a sharp surge in the
overall user base in the past 4-5 months.
• As scores of employees of Paytm decided to monetise their ESOPs, the exercise also allowed the
Chinese entities, Alibaba and its payments arm Ant Financial, to consolidate their holding in One97
Communications. Alibaba and Ant Financial own 45 percent stake in One97 Communications.

19. • Since the government's decision to ban high-value notes of Rs 500 and Rs 1,000 denomination
came into effect on 8 November, 2016, consumers across the country, especially in metros, cities
and towns, mostly shifted to digital payments, thereby boosting the user base of Paytm significantly.
• Paytm's higher valuation and investors readiness to pump in funds into the company comes at a time
when India's leading home-grown ecommerce players continue to face valuation downgrades and
difficulty in raising funds from overseas investors

20. PAYTM’S ESOP SALE TURNS 20 EMPLOYEES
INTO DOLLAR MILLIONAIRES(2018)
• 20-25 paytm employees have turned dollar millionaires after the company allowed staff to sell their
employee stock options. The latest ESOP sale was worth rs. 300 crore, and valued paytm at $10 billion
(rs. 65,000 crore)
• More than a hundred employees have sold stock options that were worth more than rs. 10 lakh, turning
them into rupee millionaires. Some 20-25 employees sold stock options worth more than rs. 6 crore,
turning them into dollar millionaires
• The company’s esop pool isn’t restricted to top- or mid- level executives, but employees and office
staff who have been around (with the company) from early days. Among rupee millionaires, is an
office boy, who got an opportunity to sell his shares and became richer by rs 20 lakh.

21. • Paytm, which was valued at around Rs 445.09 billion in May 2017 when it raised around Rs
114.45 billion from Japanese telecom giant SoftBank Group, got a bump in valuation after its
most recent rounds of secondary sale of shares, most of which according to sources were
sold to Discovery Capital
• Paytm calculates the eligibility for awarding Esops based on an individual’s contribution to
the firm, long-term potential, and duration of employment.
• Esops are one of the most effective reward and retention tools, and the success of Paytm has
helped create unparallel wealth among its employees. The company’s open culture and
values based on empowerment and ownership have attracted and retained the best talent in
the industry, helping it drive strong growth.

22. DIWALI BONANZA FOR PAYTM EMPLOYEES
AS IT ADDS RS 300 CR TO REVISED ESOPS
SCHEME(2019)
• The company held its annual general meeting in the last week of September and passed a special resolution to
approve the adoption of the newly proposed One97 Employees Stock Option Scheme 2019 (“ESOP Scheme
2019”).
• According to RoC filings by Paytm, the company has increased its existing ESOP pool from 1,923,620 equity
options to 2,166,524 equity options having a face value of Rs 10 each. The new ESOP scheme will have a
maximum vesting period of 5 years.The SoftBank-backed firm has added 2,42,904 shares worth Rs 357.66 crore to
the revamped ESOPs pool. The new ESOP scheme makes up about 3.72% stake as per Paytm’s shareholding
pattern and according to Entrackr’s back of the envelope estimate, the ESOP pool in total is valued about Rs 3,150
crores.
• After encashing stocks, many would go on to turn entrepreneurs and angel investors.

24. PROFILE
•Industry : Retail
•Founded: 1930
•Number of Stores: 1239
•Employees: 193000
•Business:retail locations, cooking schools, corporate offices, 9
grocery distribution centers, and 11 manufacturing facilities

25. • Stock was made available to associates in 1959, originally priced at $10.00 per share
• Receive 8.5% of their annual salary in the form of company stock after they have been with the
company for more than 12 months and put in more than 1,000 hours of work.
• The big one is that each employee receives quarterly stock dividends at no cost to them, meaning
they don't have to buy in — it's automatic. Combine that with the fact that Publix is making
record-breaking profits, and that makes for a nice stock payday.
PUBLIX ESOP SCHEME

26. • For example, if you work as a store manager for 20 years, you might earn between $100,000 to
$130,00 per year, have $300,000 in stock, and have received $30,000 in dividends.
• The person in charge of bakery strategy started out decorating cakes. One of the distribution
center manages started out unloading railcars. And retired Publix CEO Ed Crenshaw, despite the
fact that he is Publix Founder George Jenkins' grandson, started his tenure at the grocery giant as
a clerk in Lake Wales, Forida. As for current Publix CEO Todd Jones, who took over the company
reins in 2017? Not only did he start as a store clerk in New Smyrna Beach, FL, but he's also the
first CEO who's not related to the Jenkins family. Looks like the American Dream is still alive at
Publix.
• the average Publix store manager has worked there for approximately 25 years, and some
associates have been there for 30 years or more.
• Publix’s voluntary turnover rate is 5 percent, compared to the retail industry’s average of 65
percent.

27. FACTS
• No. 12 on Fortune magazine's list of 100 Best Companies to Work For in 2019, up from No. 47
in 2018
• No. 7 on Forbes' 2017 list of America's Largest Private Companies, and is the largest in Florida.
• #1 on 2018 list of World's Most Admired Companies in the Food & Drug Stores sector by
Fortune.
• The company, founded in 1930, has never had a layoff.
• Publix is a private corporation that is wholly owned by present and past employees and members
of the Jenkins family.

29. PAST : INFOSYS INTRODUCED ESOP IN 1990
• Though not well publicized Wipro was the first Indian company in
1985, if not one of the earliest companies in India to introduce
ESOPs. However, it was Infosys in the 1990s which brought ESOPs
into public discourse with the large number of ESOP rupee
millionaires and billionaires it created.
• In 1990s, Income tax was a critical factor that added more sheen to
the already glittering ESOPs, making it more attractive. Being
exempt from tax both at the time of exercise of options and at the
time of sale due to the then prevailing tax laws, the value of ESOPs
doubled compared to its alternative salaries.
• ESOPs first came into prominence soon after Infosys’ IPO when
reportedly 2000 employees became Rupee Millionaires.

30. • The euphoria over that ESOP Dhamaka cycle contributed significantly to the rise of the IT
industry in India, with many professionals drawn to the possibility of making a small fortune by
selling their stock options.
• So profound was the impact of Infosys’ success and the attractiveness of its ESOP plan that
almost overnight, thousands of engineers and aspiring entrepreneurs across India had to dodge
questions that typically were along the lines of :
“Infosys mein naukri nahi mili kya?” (‘Couldn’t you get a job at Infosys?’)
• The Infosys management has over the years rewarded selected staff belonging to C, D and E
grades with shares of faithful services and excellence in work.
• By the time infy began skyrocketing in value, 67 of these people including eight drivers, owned
enough stock to make them very rich men indeed.
• An interesting reality that every newcomer to Infosys in the early 2000s faced was the possibility
that the attender serving them tea might be one of the many millionaires the company had created.

31. • The IT giant had put in place the 1994 Employees Stock Option Scheme (ESOP), which along with the 1998
American Depository Receipt scheme and the 1999 scheme, gave shares to over 18,000 employees. This created
hundreds of dollar millionaires and thousands of rupee millionaires. Drivers, office assistants and secretaries got
shares along with others and became millionaires. It soon became the most successful scheme in India and set a
benchmark for other companies.
• Infosys has given ESOPs worth Rs 50,000 crore since its inception. Employee received shares at reduced price.
• Narayana Murthy – “Today, every Indian employee at every level who joined us on or before March 2010 is a
stockholder of Infosys”
• “ESOP gave Infosys a unique positioning, democratised wealth and suddenly the professionals realised that they
too could become wealthy by ethical means early in their careers,” Infosys' annual report said.
• The 1994 ESOP scheme was sought to be taxed in the hands of the employees and after a legal battle, the Supreme
Court held in 2008 that the scheme did not create a taxable event, allowing all grantees the benefit of no tax, helped
the course by the abolition of capital gains tax on sale provided the shares are held for more than 12 months.
INFOSYS – WHAT DID THEY DO RIGHT?

32. ESOP FACTS – RS 10,000 TURN INTO RS 2 CRORE
• 25 years of Infosys listing: India’s second-largest IT company Infosys
Ltd completed 25 years of stock market listing on Thursday, 14 June 2018. Over the
course of last 25 years, Infosys Ltd has been one of the best blue-chip company so
far in terms of stock returns, revenue growth and other financial parameters.
• IPO: Infosys Ltd IPO was launched in February 1993 following which it got listed
in June 1993. Shares of Infosys made a blockbuster debut at the stock market as the
share price rallied more than 50% to Rs 145 in the opening trade as against an
issue price of Rs 95 per equity share.
• Infosys stock returns: Infosys Ltd launched its IPO (initial public offering) in
February 1993 and made its stock market debut on 14 June 1993. Infosys share price
has returned more than 1600% to Rs 1245.6 (adjusted to all bonuses, stock split, etc).
Incorporating all bonus issues, stock splits and the appreciation in share price, Rs
10,000 invested in Infosys shares at the time of IPO, has turned into well over
Rs 2 crore in the span of 25 years.

33. • Global listing of Infosys shares: Upon the successful debut on the domestic bourses, Infosys Ltd tapped
foreign stock markets with regard to the listing. In early-1999, Infosys Ltd issued about 20.7 lakh ADSs
(American Depositary Shares), at $34 per ADS. These ADSs were listed on the New York-based world’s
second-largest stock exchange NASDAQ. Earlier in December 2012, Infosys’ ADSs were transferred to
NYSE (New York Stock Exchange) from NASDAQ (National Association of Securities Dealers Automated
Quotations). Subsequently, in 2013, Infosys ADSs were listed on Euronext London and Euronext Paris.
• Bonuses and stock split: Infosys Ltd has announced 11 bonus issues and one stock split since inception.
Interestingly, in the 25-year long listing history, Infosys has never missed distributing dividends since the year
2000, as the data available with BSE.
• Millionaire employees: With the rising valuations, a huge number of Infosys employees have become
millionaires within the span of 25 years of listing due to its ESOPs (Employee Stock Options) program.
• Cash reserves: At the end of 31 March 2018, Infosys had Rs 19,818 crore in cash and cash equivalents.
• Debt-free: Infosys Ltd is a zero debt company. Infosys doesn’t have any outstanding debt or fixed deposits.

34. EXPANDED STOCK OWNERSHIP PROGRAM
• In May 2019, Infosys Announced a Benchmark Stock Ownership Program Based
on Performance
• Infosys introduces new stock option plan to retain talent
• Allocated 50 mn shares to employees aligned to shareholder value creation and
to broaden and deepen employee ownership of the company
• Techies, Senior management, and other employees will be awarded as many as
50 million shares on the basis of their performance.
• The Infosys Expanded Stock Ownership Program 2019, under which grants will vest based on performance, aims to align employee
interest with shareholder value creation, incentivize, attract and retain key talent, and reward employee performance with ownership.
• Under the new plan, chief operating officer UB Pravin Rao also gets shares worth Rs 4 crore. In total, Infosys has revived its Esop for
all staff, offering as much as five crore shares or 1.15% of its total stock. In 2016, the firm had committed 1% of shares in an Esop as
it battled attrition of employees.
• By making employees owners, Employee get an opportunity to be beneficiaries in the long term success of the company and realize
the results of their work and dedication – Salil Parekh
“2019 Plan”

36. LATEST DEVELOPMENT (2019)
• Govt may rewrite startup’s Esop fable-
The Department for Promotion of Industry and Internal Trade (DPIIT) has begun discussions with the finance ministry on taxing shares
granted by startups under their employee stock option plan only at the time of sale, as part of a package aimed at making the country a hub
for startups. At present, Esops are taxed, as income, when employees exercise their options and convert them to shares.
• Linking ESOPs with performance incentives-
Infosys, Adobe etc

37. REFERENCES:
• https://www.thehindubusinessline.com/info-tech/the-infosys-way-of-creating-millionaires/article23048721.ece
• https://www.rna-cs.com/employee-stock-option-plan-esop-companies-act-2013/
• https://www.financialexpress.com/market/25-years-of-infosys-listing-rs-10000-turn-into-rs-2-crore-25-facts-about-indias-second-largest-
it-firm/1206050/
• https://www.cnbctv18.com/information-technology/infosys-introduces-new-stock-option-plan-to-retain-talent-3358931.htm
• https://economictimes.indiatimes.com
• https://shubhankar.co/a-fistful-of-esops-7c42eeb647b0
• https://entrackr.com/2019/10/paytm-esops-value-crosses-rs-3150-cr/
• http://www.publixstockholder.com/financial-information-and-filings/esop
• https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/flipkart-delivers-100m-esops-to-a-chosen-
few/articleshow/69260754.cms?from=mdr
• https://www.infosys.com/investors/reports-filings/documents/expanded-stock-ownership-program2019.pdf