CRED completes Rs 9 crore ESOP buyback programme with $81 million Series C funding; valued at $806 m

Freecharge Co-founder Kunal Shah’s credit card bill payment app CRED has completed its first ESOP buyback programme from existing and former employees. The buyback was initiated during its $81 million Series C round of funding raised back in November 2020, from its existing investors DST Global, which had led the round, along with Sequoia Capital, Ribbit Capital, Tiger Global, and General Catalyst. Sofina, Coatue, and Satyan Gajwani of Times Internet had also participated in the round that valued CRED at a post-money valuation of $806 million. According to the company, the employees had liquidated their ESOPs collectively worth Rs 9 crore.

“The ESOP buyback was completed on Jan 01, 2021. This is the first ESOP liquidity program initiated by CRED, just two years into its operations. Employees who hold vested stocks were eligible to sell up to 50 per cent of their vested ESOP shares in the company,” CRED said in a statement. “Due to Covid-19, startups have realised that one way to keep the high performing employees interested and engaged is to ensure that there is sharing of the wealth with such employees. So those who have vested shares have been given an option to participate in the buyback process,” Souvik Ganguly, Managing Partner, Acuity Law had told Financial Express Online.

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ESOPs are being used by enterprises across the world to encourage employees to buy shares and own a part of the company in order to ensure a sense of ownership among them. The ESOP buyback trend perhaps began back in 2018 when Flipkart had announced a 100 per cent buyback option of vested ESOPs. In the past few months, a handful of startups such as including Cars24, Meesho, Zerodha, Unacademy, Swiggy, Razorpay, CarDekho, BharatPe, OYO, Byju’s, and more had launched such ESOP liquidity offers for employees.

“We are committed to enabling wealth-creation opportunities for them and have allocated 10 per cent of our cap table allocated for ESOPs even at the Series C stage,” said Kunal Shah, Founder, CRED. The company claimed growth to more than 5.9 million ‘high-trust individuals’ with a median credit score of 830 while processing India’s 20 per cent of all credit card bill payments. The startup had raised $255.5 million in five funding rounds so far, as per Crunchbase. India’s credit card user base had reached 47 million in 2019 and is likely to grow at a CAGR of over 25 per cent during the 2020-2025 period on the back of the rising popularity of credit cards and the growing trend of purchasing products first and paying later, according to TechSci Research. While the market is smaller in comparison to the debit card, however, it is expected to see a significant rise in the coming years.