In a groundbreaking move, Mahindra & Mahindra (M&M), a titan in India’s automotive and technology sectors, has announced a one-time Employee Stock Ownership Plan (ESOP) grant for 12,000 to 14,000 employees, extending benefits to shop floor workers for the first time. This initiative, spanning three core companies—Mahindra & Mahindra (auto and farm sector), Mahindra Electric Automobile, and Mahindra Last Mile Mobility—comes on the heels of soaring sales and profits, driven by blockbuster products like the Thar, which have propelled M&M’s stock value up more than 12 times in five years. With a market capitalization of Rs 3,92,925 crore and shares closing at Rs 3,160 on the BSE, M&M’s decision to distribute ESOPs, estimated at Rs 400-450 crore, signals a transformative approach to employee engagement and wealth creation. This bold step not only rewards long-term contributions but also sets a precedent for fostering an entrepreneurial mindset among employees, particularly in startups, and could reshape how Indian companies incentivize their workforce.
Mahindra’s ESOP Initiative: A Game-Changer
M&M’s ESOP scheme, structured as restricted stock units (RSUs), targets employees with at least 12 months’ tenure, from shop floor workers to C-suite executives. This inclusive approach is a rarity in Indian conglomerates, as it extends ownership opportunities to blue-collar workers, many of whom are exempt from taxes on ESOP gains if their income falls below the taxable threshold. Anish Shah, M&M’s group chief executive, emphasized that the grant is a tribute to employees’ efforts, making them co-owners in the enterprise and aligning their interests with the company’s value creation. Rajiv Agarwal, a strategy expert at SPJMR, noted that this move fosters a productive environment where labor participation drives higher productivity, allowing employees to benefit from stock price appreciation alongside their salaries. This dual compensation model aligns individual and organizational success, particularly as Mahindra Electric and Mahindra Last Mile have seen over 10x valuation growth in the past five years.
ESOPs in Indian Companies and Startups: A Growing Trend?
While M&M’s initiative is pioneering for its inclusion of shop floor workers, ESOPs are not new in India, especially among startups. Companies like Flipkart, Swiggy, and Zomato have long used ESOPs to attract and retain talent in competitive markets. For instance, Swiggy announced profitability in its food-delivery business in 2023, partly attributing its success to motivated employees incentivized by ESOPs. Similarly, Freshworks, a Nasdaq-listed SaaS company, has leveraged ESOPs to reward employees, contributing to its $194.6 million revenue in Q4 2024. However, M&M’s scale and inclusivity set it apart, as few large conglomerates have extended such benefits to non-executive staff. In the startup ecosystem, ESOPs are often reserved for senior or tech talent, but M&M’s approach could inspire founders to broaden their scope, fostering a sense of ownership across all levels.
Encouraging Dedication and Reducing Churn
The startup landscape in India is notorious for high employee churn, as talent often chases higher salaries in a competitive job market. ESOPs offer a compelling antidote by encouraging employees to think like entrepreneurs rather than job-hoppers. When employees hold a stake in the company, their commitment deepens, as their efforts directly contribute to the company’s valuation and, consequently, their personal wealth. This ownership mindset can enhance work quality and productivity, as employees are motivated to innovate and drive results. M&M’s ESOP grant exemplifies this, rewarding long-term dedication and aligning employees with the company’s growth trajectory. For startups, where resources are often constrained, ESOPs provide a cost-effective way to retain talent without immediate cash outflows, reducing churn driven by salary competition.
A Call to Youth: Think Like Entrepreneurs
M&M’s initiative sends a powerful message to India’s youth: treat the company you work for as your own. Instead of pursuing short-term salary gains, young professionals can invest their time and effort in organizations that offer ESOPs, reaping rewards when the company succeeds. This entrepreneurial approach encourages employees to contribute creatively and strategically, knowing their efforts could yield significant financial benefits. For startup founders, M&M’s move underscores the importance of rewarding staff commitment through equity. By offering ESOPs, founders can cultivate a loyal, motivated workforce that drives innovation and growth, creating a win-win scenario. This model not only enhances employee retention but also builds a culture of shared success, where every contribution matters.
The Road Ahead
M&M’s ESOP revolution, led by executive chairman Anand Mahindra and executive director Rajesh Jejurikar, could inspire a wave of similar initiatives across India’s corporate and startup ecosystems. By making employees co-owners, companies can foster a culture of dedication, reduce churn, and elevate productivity. For young professionals, the message is clear: embrace an entrepreneurial mindset, invest in your company’s vision, and share in its success. For founders, rewarding staff with ESOPs is a strategic move to build resilient, innovative teams. As M&M sets the benchmark, the Indian business landscape may see a shift toward more inclusive, equity-driven compensation models, redefining how companies and employees grow together.
Source: The Economic Times, August 2, 2025
