Flipkart's past and present employees set for New Year bonanza. Details here

Flipkart's $700 million one-time cash payout will benefit at least 25,000 past and present company employees, making it one of the biggest wealth creation instances in the Indian startup ecosystem, a report by Moneycontrol said.

Who will pay so much cash to present and past Flipkart employees?

Investors of Flipkart, including Walmart, will pay for the cash payout and benefit past and present employees of Flipkart, Myntra and PhonePe.

How is this cash payout different from ESOPs?

This cash payout is different from a typical equity or ESOP buyback as here, they are not selling any options but getting money as a part of the company's move to separate PhonePe. The company announced the payout on December 23.

What did the company actually say?

"We are pleased to announce that employees, who are holders of Flipkart ESOPs (employee stock option plans), will receive a one-time discretionary cash payout as part of the transaction. This payout represents the value of the PhonePe holding within those Flipkart options," Kalyan Krishnamurthy, CEO of Flipkart, told employees in an internal mail, as reported by Moneycontrol.

How was the share price of Flipkart calculated? 

The share price of Flipkart was determined at $165.83, excluding PhonePe. However, the payout will be $43.67 per option. This shows that the company's valuation has nearly doubled since its acquisition.

When was the separation of PhonePe completed?

Earlier this week, Flipkart said it had completed the separation of PhonePe, which it acquired in 2015. PhonePe has recently moved its registered office from Singapore to India and is looking to launch an IPO in the country.

Why is the timing of this IPO crucial?

The listing plan comes at a difficult time in the markets. PhonePe's closest competitor, Paytm, has seen a 75 per cent drop in its valuation since its listing in November 2021.