At a time when most Indian startups are using employee stock ownership plans (Esops) to conserve cash to ride out the Covid-19 crisis, discount brokerage Zerodha will buy back Esops in an effort to unlock liquidity for some of its senior and long-serving employees in the absence of any plans to raise funds or go public.
In a chat with ET’s Alnoor Peermohamed and Ashwin Manikandan, Zerodha founder and CEO Nithin Kamath breaks down the company’s future, its self-certified $1 billion valuation and his take on the highly volatile capital markets.
Esops buyback
Zerodha will spend Rs 60-65 crore to buy back Esops this year, at a self-assessed enterprise value of Rs 7,000 crore. The buyback is being done at more than four times its book value, or Rs 700 per share, and is expected to benefit around 700 employees.
Why it matters
This is significant because it’s the first time that a valuation is being ascribed to Zerodha, which has never picked up external capital. Read more.
Kamath said the brokerage is seeing a new breed of first-time investors entering the stock market, which is most active right now since 2007. There has been at least a 40-50% bump in investment activity in the first quarter of the fiscal compared to last year, he said.
Quote of the day
“The average age on our platform which was 32 last year has dropped to 28. This crowd is not coming in and putting a load of money, the average trade size for equity investment has dropped down to Rs 15,000 down from Rs 25000. But it is good for the ecosystem.”
– Nithin Kamath, founder and CEO, Zerodha
Read the full interview: India’s stock market most active right now since 2007: Zerodha CEO Nithin Kamath
Softening the pay cut blow
India’s top startups, including Oyo Hotels & Homes, Zomato and Grofers, have expanded their Esop pools as they hand out additional stocks to existing employees to retain them, as well as to those that have been furloughed or have taken salary cuts during the ongoing economic crisis wrought by the Covid-19 pandemic. But at a time when most of these companies are expected to have down rounds, or at best, flat valuations, stock options may be unviable for employees.
Why it matters
This comes at a time when India’s top consumer-facing internet startups have been hit hard by the outbreak, forcing a number of them to initiate pay cuts across the board, undertake layoffs and furloughs, as they struggle to rein in costs and conserve cash. Read more.
Ecommerce sales rebound
India’s ecommerce industry has recovered about 90% of its overall order volumes since restrictions on shipping of non-essential products were relaxed in early May, according to industry estimates. The total value of items sold online, however, remains low as consumers continue to avoid large-ticket purchases in the wake of economic uncertainty occasioned by the ongoing pandemic.
What helped?
The volume jump in recent weeks was led by the significant uptick in sales of electronics, according to data from Unicommerce, a technology solutions provider for the ecommerce industry. This includes items such as phone and computer accessories, trimmers and Wi-Fi routers, which grew 145% compared to sales before the Covid-19-induced nationwide lockdown. Read more.
Funding crunch
Early-stage deals halved in the first six months of the year, while the number of technology businesses that were set up sharply slowed, data shared by venture capital industry tracker Tracxn showed. Investment rounds in the under-$5 million category fell 50% to 240 deals, while it dropped 33% to 489 deals overall in the first half compared to the same period last year.
What’s the reason?
Investors and founders said a weakened economy, further hit by the Covid-19 pandemic, has pushed the startup ecosystem to stay cautious. Investors have also been concerned about the wavering commitment of their own Limited Partners (LPs), which are backers of funds. They fear LPs will push back drawdowns and restructure asset allocation plans, hurt by the pandemic as well as India’s standing in the larger geopolitical arena. Read more.
Swasth app
A grouping of over 100 hospitals, health-tech startups and technology providers have joined forces to launch a free telemedicine consultation app ‘Swasth’ to fight the Covid-19 pandemic in India. Partners of the programme include the likes of large hospital chains such as Apollo and Manipal, health-tech companies like MedLife, 1MG, and Care.Fit among others.
Why it matters
Swasth will provide access to free teleconsultations through a network of over 2,000 certified and trained doctors for Covid-19-related ailments in India. The app will also make available resources to find available beds, diagnostic labs and home quarantine aids at the time of its launch on June 24. Read more.
(Illustrations and graphics by Rahul Awasthi)
Leave a Reply