Employees of Paytm, which is slated to go public in November, are looking to convert their stock options into shares in their droves, our sources told us. At Paytm’s current valuation of Rs 12 lakh crore, the options being converted would be worth more than Rs 600 crore, they said.

Ahead of Paytm’s IPO later this year, hundreds of the company’s senior executives are converting their employee stock options into shares. Cumulatively, the options being converted into shares could be worth more than Rs 600 crore, sources told us.

This is based on Paytm’s most recent valuation of about Rs 12 lakh crore, or $16 billion.

To facilitate these transactions Paytm is working with its non-bank lending partners to provide loans of around Rs 100 crore to its top executives, the sources said.

Loans for what? The loans are to help employees deal with the tax payout during the conversion. Paytm has been issuing stock options to employees for over 12 years now and its shares are currently valued at around Rs 18,000. So, an employee who received stock options at, say, Rs 1,000 a share, will have to pay tax (based on their salary bracket) on the difference—i.e. Rs 17,000.

Paytm will bear the interest payments for the loans, our sources said, and the employees will have to pay back the principal within six months of the listing.

Employees’ shares, unlike those of investors, are exempted from any lock-in period after the IPO. For example, Paytm has the option of raising around Rs 2,000 crore before the initial public offering but those who invest in this round won’t be able to sell their shares for a year after the IPO.

Earlier this month, the Noida-based company also sent a letter to shareholders seeking their nod to double its employee stock options pool. The proposal will be discussed during Paytm’s extraordinary general meeting on September 2.

An important tool for startups: New-age companies use employee stock options as a way to attract and retain talent. Over the past 12-18 months, demand for them has risen as startups have seen their valuations skyrocket on the back of record funding. Companies that have announced stock options for employees include PhonePe, Udaan, Razorpay, Cred, Acko, Zerodha, and Ola.

Founders say this is part of the “wealth creation” opportunity that comes from working for a startup. Last month, we reported that a host of startups have bought back employee shares worth $546 million in total.

Source: source