Luxury sales may get a boost as Flipkart deal mints hundreds of crorepatis

Bengaluru: Walmart Inc., which sealed the largest e-commerce deal in history with its $16 billion buyout of Flipkart on Wednesday, has set aside nearly $500 million to buy back shares from existing and former employees of Flipkart, according to three people aware of the development.

The ESOP (employee stock options) payouts may see a number of executives splurge on apartments and buy expensive goods such as luxury cars and high- to -mid-range sedan models, according to employees and real estate developers.

The ESOP buyback from Walmart will be the biggest ever in the Indian start-up ecosystem and is expected to turn a few hundred Flipkart employees into crorepatis. Existing employees may be given the option of cashing out fully across three years, the people cited above said.

The $500 million doesn’t include payouts to Flipkart co-founders Sachin Bansal and Binny Bansal and Flipkart CEO Kalyan Krishnamurthy.

Juggy Marwaha, executive managing director of JLL India, said the Flipkart employees are likely to invest some of their gains in real estate.

“I see them looking to buy apartments as well as strata or space buying in good-quality office buildings, which is where many HNIs are investing in today,” he said.

Billionaire Jitu Virwani, who heads real estate firm Embassy Group, said he sees the new crop of millionaires investing in real estate and stocks.

The latest ESOP buyback at Flipkart is one of the rare instances of employees in India’s start-up ecosystem receiving a payout of this scale, with headhunters comparing it to the ESOP programme that software major Infosys created for its employees, many of whom turned millionaires after Infosys went public in the 1990s.

This, however, isn’t the first time that Flipkart’s current and former employees have benefitted from a share buyback. Last year, SoftBank Group also set aside close to $100 million to buy back shares from employees after the Japanese firm invested over $2.5 billion in Flipkart to purchase primary and secondary shares. Over the past six years, there have been at least four other buybacks at Flipkart, though none at this scale, according to former employees.

“This is a tremendous boost for employees of Flipkart. For the longest time, we thought we wouldn’t see this day come anytime soon, given that the company was struggling a few years ago and was losing out to Amazon,” said a former Flipkart executive, who left the company last year to launch his own venture. He requested anonymity.