Case Study Razorpay Esop

About Razorpay

Razorpay was co-founded by two IIT Roorkee alumni Harshil Mathur and Shashank Kumar in 2013. Razorpay offers a solution to the businesses to streamline payments and make their lives easier. It allows businesses to accept, process and disburse payments in line with the product suite. In 2024, the start-up was valued at $7.5 billion.

Razorpay aims to revolutionize money management to provide secure and hassle free integration. Over the last several years, Razorpay has been working to develop a financial ecosystem to streamline and simplify the financial lives of small and medium businesses. It offers a fast, secure and affordable way to the merchants, ecommerce businesses, companies and schools to accept and disburse payments without any hassle. Razorpay is now the banking partner choice for over 8 million businesses. 

Razorpay ESOP Buyback

The process of buying back the shares from employees for a consideration which were earlier granted to them under ESOP structure of the company is known as ESOP Buyback. Start-ups and companies offer buyback for several reasons such as restructuring the ownership, creating wealth or providing liquidity to employees. The Razorpay ESOP buyback conducted in 2023 was valued around $112 million while it centred around $292 million in 2022. Many start-ups such as Swiggy, PineLabs and Rebel Foods conducted ESOP Buyback in India in 2022, with Razorpay case study standing out as a key example of how employee stock options can be leveraged to benefit both employees and the company. 

So far, Razorpay has launched four ESOP buyback programs, demonstrating its commitment to employee benefits:

• First Razorpay ESOP Buyback in 2018

Razorpay conducted its first ESOP buyback in November 2018. The buyback was conducted for 140 employees and the shares were purchased by Razorpay’s largest investor Tiger Global at 50% premium of the company's valuation. The buyback was valued at $10 million and the buyback programme made Razorpay one of those early-stage start-ups to conduct liquidity events at that time. 

• Second Razorpay ESOP Buyback in 2019

The second ESOP buyback was conducted by Razorpay in November 2019. This included purchase of shares from 400 employees. The shares were purchased by Ribbit Capital and Sequoia Capital and the buyback was worth $4 million. Eligible employees could sell up to 30% of their ESOP shares.

• Third Razorpay ESOP Buyback in 2021

Razorpay’s third ESOP sale was conducted in March 2021 for its 750 eligible employees. The buyback was worth $10 million. Razorpay’s two key investors Sequoia Capital India and GIC were the buyers of shares in this ESOP buyback plan. The eligible employees holding vested stocks could sell 33% of their ESOP shares.

• Fourth Razorpay ESOP Buyback in 2022

Razorpay conducted its fourth and largest ESOP sale in May 2022 for 650 current and former employees (irrespective of their rank). The sale was led by Lightspeed Venture Partners with participation from Moore Strategic Ventures. The Razorpay ESOPbuyback sale was worth $75 million (Rs. 578Cr).

To date, 1940 existing and former employees have been awarded across different levels. 

Conclusion

Buyback is backed by many reasons and one of those could be to show gratitude to employees who have always empowered the success of the business. Razorpay powers around 34 businesses which are the unicorns of India. Razorpay ESOP buyback is a way to give something to their employees and a way to make a difference in their lives. The ESOP sale by Razorpay means a lot more than just an ordinary buyback. It aims to strengthen the financial infrastructure so that the employees can also witness unrestricted growth. Moreover, it tries to serve the benefits across all roles and ranks including existing as well as former employees. Thus, fostering a sense of inclusivity amongst all the employees.