Bumper IPO: Indigo Paints creates wealth for employees

Indigo Paints had a bumper listing on the stock exchange last month with the stock price touching a high of Rs 3,118.65 — 75% premium over the issue price of Rs 1,490 .

The market cap rose from Rs 2,500 crore in 2019 to Rs 12,000 crore after IPO. Founder and CMD Hemant Jalan said performance-linked incentives and employee stock ownership plans (ESOPs) are a big part of the company’s incentive plan for employees for both staff-retention and to build the team.

Indigo follows a lean management structure with around 650 in the management cadre and, of them, 115 were given employee stock options at different points of time, Jalan said.

Senior management gets ESOPs after spending one to two years with the company. Even the mid-management level become eligible after working here for three to four years. Stock options have been issued to the ranks of assistant manager and above.

Jalan plans to expand the pool every year and give fresh round of ESOPs to employees.

It was the entry of Sequoia Capital that encouraged Indigo to grant ESOPs, said the CMD. Around 50 to 60 employees sold the first lot of ESOPs and some had retained part of their holdings. Apart from ESOPs, during the IPO, employees also got a discount of 10% to the IPO price for shares that were reserved for them.

Around 35 employees sold stocks in the open market. IPO is the most desired exit plan for ESOPs in unlisted companies, said Harshu Ghate, co-founder and MD of ESOP Direct, an integrated full spectrum online stock plan management services company.

While success of ESOPs in tech companies makes news, manufacturing companies such as the Mahindra Group, ITC Group and Murugappa Group have been running successful ESOP programmes covering their employees. V Tech Wabag, Bandhan Bank, Ujjivan Bank, Equitas and a host of other supply chain companies are other notable success stories, said Ghate. There are risks and there is a need for proper communication about ESOPs and setting realistic expectations, suggested Ghate.