Food delivery company Zomato, which allocated 4.66 crore shares from its ESOP (Employee Stock Option Plan) pool at a strike price of Rs 1, fell 21% in two days under selling pressure.

The company said in a July 26 bourse filing that the board’s nominating and compensation committee had approved the distribution of 46,551,600 shares to employees upon exercise.

At current share price levels, the entire rights issue is worth about Rs 193 crore. At the time of writing, Zomato is trading at Rs 41.65 per share.

Zomato, which owns about 613 crore shares, or 78% of Zomato’s stake, ended Saturday with a one-year lockup period that analysts warned could face selling pressure this week.

Experts expect large pre-IPO investors in Zomato to cut some of their stakes, even as Zomato’s market value has fallen below its last private market valuation of $5.5 billion.

The media earlier reported that the ESOP given to Zomato co-founder and CEO Deepinder Goyal cost the company Rs 387 crore in fiscal FY22. Meanwhile, the cumulative ESOP cost for the entire FY22 was Rs 779 crore due to incentives for the company’s three key management personnel (KMPs).

Of the full amount, the company incurred a cost of Rs 753 crore due to the CEO’s equity compensation, according to Zomato’s FY22 annual report.

The other KMPs are Chief Financial Officer Akshant Goyal and Company Secretary Sandhya Sethia.

In May, the company’s CEO recently told employees in an internal note that he would donate about Rs 700 crore of his ESOP proceeds to the Zomato Future Foundation in FY22. The money will be used to provide education for the partner’s children.

Some experts have been critical of the ESOP policies of startups such as Zomato, Paytm and Policybazaar, which were listed on the exchange last year. Although these companies are still in the red, the founders and executives of these companies have received substantial ESOP funds.

Employee benefit spending, including costs the company incurs from employee stock options, surged in the fourth quarter (January-March). Paytm’s employee spending jumped 148% to Rs 863 crore, Zomato jumped 112% to Rs 407 crore and Policybazaar rose 94% to Rs 374 crore. Nykaa‘s ESOP programme was relatively solid, with the figure rising 32% to Rs 91 crore.

When asked about profitability, loss-making tech companies resorted to talking about a metric called “adjusted EBITDA” – which takes the cost of ESOPs out of EBITDA (earnings before interest, taxes, depreciation, and amortization) in several quarters.

Paytm, for example, has said it will be profitable on “adjusted EBITDA” terms by 2025, and Zomato’s letter to shareholders eloquently illustrates how this metric is improving quarter-to-quarter.