Flipkart will issue additional stock options to employees to whom ESOPs were allotted when its valuation was higher than the one established in the latest funding round.

This is being done to ring-fence the employees from a drop in the share price, the e-commerce giant’s Group CEO Binny Bansal said in an email to employees.

Earlier this week, Flipkart announced that it had raised $1.4 billion investment from global technology firms, including Tencent, Microsoft and eBay.

The current round valued Flipkart at $11.6 billion, as against the $15.2 billion valuation in July 2015. The drop in valuation translates to a lower stock price, and would have essentially meant a notional loss for employees who were allotted ESOPs at higher prices.

In the email to employees who are part of the ESOP (employee stock option plan) programmes across the Flipkart group, which includes fashion e-tailers Myntra and Jabong, and payment facility PhonePe, Group CEO Binny Bansal said the differential grant was being made so that the total dollar value of options allotted to an employee remains unchanged.

“Still, to be sure, it is not common practice to shield employees from a funding round that values a company lower than it was valued at earlier. That privilege is usually reserved for investors whose holdings are ratcheted up in case of a drop in the stock’s price, so that their equity stake in the company stays at a steady level. Of the few start-ups that have offered such grants, the norm has been to limit it to top-most employees,” Bansal pointed out. In Flipkart’s case, however, the grant would be offered to all employees who were allotted stock options at higher than the price established in the latest funding round, Bansal wrote.

Explaining the rationale behind the move, Bansal wrote in the email:

“As an organisation, Flipkart takes immense pride in being the employer of choice for thousands of professionals—a vaulted status that only comes with a deep, company-wide sense of transparency and fairness. If Flipkart does well, so should you.”

In recent years, Indian start-ups have increasingly offered ESOPs as a way to curb attrition. The eventual windfall, however, hinges on whether the company is able to list publicly, or if it buys back the shares.

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