India’s startup sector has long promoted Employee Stock Ownership Plans (ESOPs) as a means of rewarding employees and enabling them to share in a company’s financial success. However, a dispute involving Flipkart, its parent company Walmart, and more than 1,000 former employees has brought this promise under scrutiny. The controversy centres on a reported $700 million ESOP buyback following PhonePe’s separation from Flipkart.
Former employees, commonly known as “Flipsters,” allege that they have not received benefits comparable to those available to current employees. A reported payout of approximately $43.67 per option has become a major point of contention, with former staff questioning the valuation, eligibility conditions and transparency of the process. They argue that their contribution to Flipkart’s growth should be recognised regardless of whether they remain employed by the company.
PhonePe’s separation required a reassessment of Flipkart’s valuation and prompted a buyback arrangement intended to address the resulting changes in shareholder value. However, former employees claim that communication was inconsistent and that the eligibility criteria disadvantaged some of them. They have reportedly approached Walmart’s global leadership, seeking a fair review of the arrangement and raising questions about compliance with their original ESOP agreements.
Taxation has added another dimension to the dispute. Depending on the circumstances, ESOPs in India may attract tax at the time of exercise and again when shares are sold. Former employees contend that the combination of disputed valuations and tax liabilities has reduced their expected financial returns.
The controversy could have wider consequences for India’s startup ecosystem. ESOPs are an important tool for attracting skilled professionals who accept career risks in exchange for potential long-term rewards. If employees lose confidence in equity-based compensation, startups may face greater pressure to offer higher salaries and clearer contractual protections.
Resolving the matter transparently would help strengthen corporate accountability and employee confidence. Clear rules governing valuations, buybacks and corporate restructuring are essential to protect legitimate interests. The outcome of this dispute may influence how Indian startups and multinational companies manage employee equity in the years ahead.
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