Zomato reports Rs 175 cr net profit in FQ4FY24, ESOP cost doubles YoY

Its revenue increased by 73 percent year-over-year to Rs 3,562 crore.

Further, the online food aggregator is seeking shareholder approval for a new employee stock option plan (ESOP) comprising 18.2 crore shares, valued at over Rs 3,500 crore at the current market price, reported Moneycontrol.

Once approved, the ESOP plan is usually distributed to employees over several years.

In a communication to shareholders, Zomato CEO Deepinder Goyal stated that the new ESOP pool, equivalent to 2 percent of the company's outstanding share capital on a fully diluted basis, should suffice for the next five years, according to the reporting.

According to Zomato's management, ESOPs are critical for fostering a culture of long-term thinking and innovation, instilling a 'founder mindset' among senior employees. This, in turn, drives the right outcomes for creating long-term shareholder value, the report added.

Considering the employee cost, adding cash and ESOP cost has come down significantly as a percentage of revenue has come down significantly.

Zomato’s ESOP cost nearly doubled to Rs 161 crore in the March quarter, up from Rs 84 crore in the same period last year.

Despite the anticipated increase in both the ESOP charge and cash employee expenses, the company expects the ratio of these costs to revenue to continue trending downwards in FY25 and beyond.

"The creation of the new ESOP pool mentioned above by itself will not lead to any increase in ESOP charge. ESOP charge is a non-cash expense and is booked only when the ESOPs are granted to employees," the management said in a conference call with analysts, reported Moneycontrol.

"We will continue to follow our earlier format of ESOPs with face value as the strike price; vesting will be linked to time and performance conditions (details of which will follow in the postal ballot notice for shareholders’ approval)," the Zomato management said.

It is worth the mention that high ESOP costs have been a concern for new-age firms like Zomato and Paytm for the last few years, said the report.