Majority Of Delhivery Institutional Investors Voted Against ESOP Proposals

Newly-listed Delhivery Ltd.'s employee stock options plan failed to pass muster with majority of institutional investors, even as the proposal was passed with overall votes in favour.

72% of the institutional votes cast were against ratifying the logistic startup's ESOP plan for 2021, according to data from the Institutional Investors' Advisory Services. Votes were cast on 94.6% of the shares that institutions own. This class of investors own 14.5% equity in the company.

Besides the 2021 ESOP proposal, institutional shareholders also voted against three other resolutions, through a postal ballot on July 10. These were:

• Ratify Delhivery ESOP plan 2012.

• Ratify extension of 2012 ESOP plan to employees of group companies, including subsidiaries.

• Ratify extension of Delhivery 2020 ESOP plan to employees of group companies, including subsidiaries.

• Ratify Delhivery ESOP plan 2021.

However, all of the proposals were passed with an overall majority.

According to IiAS, which had recommended voting against all the proposals, the common concern across these pre-IPO schemes was that the exercise price, at face of Rs 1, was at a significant discount to the market price.

As a thumb rule, IiAS recommends voting against ESOP plans if the exercise price is at a discount of 20% or more to the market price.

Further, it said that the vesting of stock is based on performance and time, without mentioning the split between the two.

The performance-based metric is singularly linked to the achievement of a target share price, IiAS said.

"We do not support performance targets that are linked to the attainment of a targeted stock price, since the stock price is not in the control of the employee," the proxy advisory firm said.

All pre-IPO ESOP schemes would result in a total dilution of around 10%, it noted.

Delhivery was listed on May 25 and since then, the stock has moved above the issue price. Shares have risen 23% to Rs 598.9 apiece. Of the nine analysts tracking the company, five maintain 'buy', three suggest 'hold' and one recommends 'sell'. The 12-month consensus target price implies a downside of 0.4%.