Business-to-business (B2B) marketplace Udaan on Wednesday said it has decided to remove the one-year cliff on employee stock option plans (ESOPs) that mandated people to wait for a year before vesting their ESOPs, and allow all future ESOP allocations to vest every quarter.
"The one year ‘cliff’ period is a widely prevalent industry practice that requires employees to wait for one year for their ESOPs to start vesting. Udaan has done away with this waiting period," said Udaan in a statement.
Udaan added that every employee will be allotted ESOPs under their annual performance cycle regardless of their tenure or job profile. These ESOPs will vest quarterly and will be completely vested within a two-year period - twice as fast as the industry norm of four years, it noted.
With these changes, Udaan ESOP holders in the company has jumped 400%.
Meenakshi Priyam, Group CHRO, Udaan, noted that the practice of granting ESOPs with a one-year cliff doesn’t reciprocate the trust that employees place on companies with their careers. "As a progressive employer, we have decided to take the lead in balancing the scales in employer-employee relationships in the industry and revamped our ESOP policy," added Priyam.
In the past months, Indian startups have been exploring creative ways to hire—and retain—staff, including expanding their ESOPs, as they battle each other and more established companies for talent. The startups have also been more agile in conducting ESOP buyback programmes.
Udaan, founded in 2016 by former Flipkart employees Amod Malviya, Sujeet Kumar and Vaibhav Gupta, links traders, wholesalers, retailers and manufacturers on a single platform, and enables them to discover customers, suppliers and products across categories. The platform also helps traders to connect directly with each other for the best deal.
The company managed to cut its net loss for 2020-21 (FY21) marginally even as the company’s revenue surged more than six times during the same period.
Earlier this month, Udaan has raised an additional round of $250 million (around Rs 1,875 crore) via convertible note and debt, regulatory filings show.
In January last year, Udaan raised $280 million (Rs 2,045 crore) that saw US-based technology investment firm Octahedron Capital and Moonstone Capital join as new investors.
