Start-up leaders reap pre-IPO windfall, never mind post-listing fate

Delhivery, Paytm, Zomato, Policybazaar saw a sharp spike in the packages of 'key management personnel' in the year they filed their RHP

* At Paytm, Vijay Shekhar Sharma and his top team saw a 50 per cent jump in remuneration in 2021-22

* The Deepinder Goyal-led management at Zomato saw its compensation rise 404 per cent in 2020-21, in part because the CFO was added to the key management KMP pool

* The top management at Delhivery, led by co-founder and CEO Sahil Barua, took home 540 per cent higher remuneration in 2021-22

Those are the years in which these start-ups filed their red-herring prospectuses (RHP) with the Securities and Exchange Board of India (Sebi), the stock markets regulator. The increase in the compensation of their top management stands out because not all of them have had a happy time after listing.

Among the recent listings, Delhivery stands out. Its shares have been trading at a premium to the issue price, touching their highest level last week, on Thursday, before falling to Rs 510.25 at Monday’s close – still above their listing price of Rs 487 apiece. Paytm, in contrast, has its shares trading 71 per cent below their listing price. Zomato, despite a strong stock market debut, has since fallen 8 per cent and is yet to catch up with its listing price of Rs 76.

 

PB Fintech, which owns Paisabazaar and Policybazaar, is trading 32.8 per cent below its listing price. The management leaders at PB Fintech saw a 182.9 per cent increase in remuneration in the year of the RHP, to go with the 439.3 per cent increase the year before.

A Business Standard analysis found that, on average, the remuneration of the key management personnel (KMP) at the 12 start-ups listed on the bourses since 2019 increased 114.9 per cent in the year of filing of the RHP. The year before, their compensation had jumped 70.3 per cent. This data is taken from their RHPs filed with Sebi.

The employees across these organisations were not as fortunate, as they could only earn, at an average, 21.4 per cent more in the year of filing of the RHP, compared to an increase of 8.8 per cent a year earlier.

Business Standard wrote to each of the 12 start-ups covered in this study, but none chose to participate or respond in writing.

Despite the generous average increase in KMP remuneration at the 12 start-ups, not all of them conform to the trend. For instance, salaries of the top executives at Nazara dropped 19.3 per cent, while overall employee compensation rose 37.2 per cent in the year the company filed the RHP.

FSN E-commerce Ventures, which owns the brand, Nykaa, saw KMP remuneration decline 23.6 per cent in the year of filing, whereas employee benefits increased 24.8 per cent. However, in the case of Nykaa, KMP compensation had risen 169 per cent the year before, while employee salaries had jumped 45 per cent.

KMP remuneration includes short- and long-term benefits and stock options but excludes other benefits such as rent. Employee benefit expenses include salaries, wages, bonuses, gratuity and leave encashment. In some cases, they also include KMP salaries. Compensation figures are annualised in some cases, especially when a start-up filed the RHP in the middle of the financial year.

A larger sample of 93 companies that filed their RHPs during this period shows KMP remuneration rose 39.2 per cent while employee compensation increased 10.9 per cent.