Tech3 | Zomato CEO's ESOPs a costly bite; Edtech soonicorns get a reality check; and more

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In today’s newsletter:

• Zomato CEO's ESOPs a costly bite
• Edtech soonicorns get a reality check
• Infosys unveils AI-first offering Topaz

Zomato CEO's ESOPs a costly bite

It is generally believed that ESOPs (employee stock options) help startups create wealth for their employees. However, this idea may be changing.

Driving the news: ESOPs given to Zomato co-founder and CEO Deepinder Goyal cost the company Rs 143 crore in the first half of FY23. This amount was also 67.5% of the entire ESOP cost incurred by the company during the period.

• The CEO and CFO cumulatively accounted for 74% of the total ESOP cost of Rs 212 crore
• This means that the cost of ESOPs for all other employees was 26%, or Rs 55 crore

Meanwhile, Zomato saw the gross order value of its food delivery business shrink about 1% to Rs 6,569 crore in the March quarter. This dip can be attributed to an industry-wide slowdown as well as the company's decision to withdraw from 225 cities.

Hurtling towards profitability?

This comes at a time when Zomato is trying to convince public market investors of imminent profitability.

• ESOP costs have decreased from 54% of all employee benefit costs in FY22 to 35% in FY23
• Zomato management has said that its goal is to become profitable in the next 4 quarters

Zomato has announced that it turned adjusted EBITDA positive in the March quarter, excluding quick-commerce business Blinkit. This announcement came just a day after its rival, Swiggy, said that its food delivery business was also operationally profitable as of March, without accounting for ESOP expenses.

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