When employees join early-stage startups, a significant portion of their compensation often comes in the form of ESOPs — Employee Stock Ownership Plans. These are contractual rights to own a slice of the company at a predetermined price, granted as a long-term incentive. On paper, they represent meaningful wealth. In practice, accessing that wealth is rarely straightforward.
The most common assumption among ESOP holders in India is that liquidity arrives only at an IPO. But IPO timelines are unpredictable. A company that projects a listing in 18 months may take four years, pivot its business model, or face valuation corrections that erode the anticipated gains. For employees who have moved on from the company, or those facing immediate financial priorities, waiting indefinitely is not always a viable option.
What many ESOP holders do not know is that a legitimate secondary market for unlisted equity exists in India — one that allows vested shares to be transferred to willing buyers at fair, market-linked valuations, well before any public listing. Platforms like ours – Altius Investech have been operating in this space, facilitating legal, transparent transactions between ESOP sellers and institutional or high-net-worth buyers.
The following three case studies — drawn from representative client experiences, with names changed for privacy — illustrate what this process looks like in practice.
The Scale of Locked ESOP Wealth in India
India’s startup ecosystem has produced over 100 unicorn companies. Each of these organisations has, at various stages of growth, issued ESOPs to employees across functions — engineering, product, operations, sales, and beyond. Industry estimates suggest that the aggregate unlocked ESOP value across Indian startups runs into tens of thousands of crores of rupees.
Despite this, a large proportion of ESOP holders remain unaware that a secondary exit route exists. The reasons vary: incomplete information from employers, uncertainty about the legal framework for share transfers, or a general assumption that pre-IPO equity is inherently illiquid.
In reality, the legal framework governing secondary transfers of unlisted shares in India is well established. The process requires proper documentation — a share purchase agreement, board or company approval where applicable, and demat transfer — but it is entirely feasible for vested ESOP holders to monetise their equity outside the IPO window.
Case Study 1: A Food-Tech Employee Navigating an Uncertain IPO Timeline
After four years at a prominent food-tech company, an employee — referred to here as Rajan — had accumulated vested ESOPs with a cumulative grant value of approximately ₹18 lakh. The company had indicated intentions to list publicly, but repeated delays driven by sector-wide performance concerns had pushed the timeline well beyond original projections.
Rajan approached Altius Investech after learning through a former colleague that secondary transactions for unlisted shares were a viable option. His primary concerns were around legality, pricing fairness, and the practical steps involved.
Following a review of his vesting documentation, Altius provided a market valuation derived from the company’s most recent institutional funding round and prevailing secondary market demand. The pricing methodology was explained in full before any commitment was made.
The transaction was completed within three weeks. Rajan received ₹26 lakh — a return meaningfully above his grant price, reflecting the company’s growth in valuation since his options were originally issued. The company did eventually list publicly, approximately two years later, at a valuation below its last private round — an outcome that validated the timing of his secondary exit.
The case illustrates a broader point: IPO outcomes are not guaranteed to exceed secondary market valuations. Employees who treat a public listing as the default endpoint may, in some cases, be taking on more risk than they realise.
Case Study 2: Exercising Options and Understanding What They Are Worth
Not every ESOP challenge is about timing. For many employees, the barrier to liquidation is informational — a limited understanding of what their options are actually worth, or uncertainty about the mechanics of exercising them.
Priya, a product professional at a fintech startup, had vested options that she had never exercised. She was unclear about the exercise price relative to market value, the tax treatment of any gains, and whether secondary transfers were permissible under her ESOP agreement. Her equity had remained dormant across three years of employment.
On engaging with us at Altius Investech, she received a structured breakdown of her position: the current unlisted market price of the company’s shares, the cost of exercising her options, the applicable tax on short-term or long-term capital gains depending on the holding period, and the net realisation she could expect.
With that clarity established, she proceeded to exercise her options and complete the secondary sale. The net proceeds amounted to approximately ₹42 lakh — a sum she applied toward a property purchase she had deferred for several years.
The informational gap is a recurring theme among ESOP holders. Many are not aware of the difference between granted, vested, and exercised options; or that the tax treatment differs significantly depending on whether the shares are held before or after exercise. Working with an intermediary that provides this context is an important part of making an informed decision.
Case Study 3: Evaluating the Trade-Off Between Early Liquidity and IPO Upside
A common question among ESOP holders approaching an IPO window is whether selling in the secondary market before a listing means leaving money on the table. The answer depends on the specifics — and on what happens after the stock begins trading publicly.
Arjun was an employee at a startup that had filed its draft red herring prospectus and was actively preparing for a public listing. Most of his colleagues were holding their ESOPs in anticipation of the listing. Arjun, however, had a time-sensitive financial commitment — funding the first year of an international MBA programme — and needed to evaluate whether an early exit made sense.
Through Altius Investech, he obtained a secondary market valuation for his shares: ₹850 per share, based on current buyer demand and the company’s pre-IPO pricing signals. The company subsequently listed at ₹920 per share — approximately 8% above the secondary price at the time of his sale.
Arjun sold 1,200 shares and received ₹10.2 lakh. At the IPO listing price, the same shares would have fetched ₹11.04 lakh — a difference of roughly ₹84,000. However, in the months following the listing, the stock declined considerably from its opening price as broader market conditions deteriorated. Colleagues who had held through the IPO and sold subsequently received lower prices than Arjun had in the secondary market.
The outcome underscores an important principle: the IPO listing price is not the same as the price at which an employee will ultimately be able to sell. Lock-in periods, post-listing volatility, and sector-level movements all affect the final realisation. A secondary exit at a known, agreed price eliminates that uncertainty — at the cost of some potential upside.
The Process for ESOP Holders Considering a Secondary Exit
For employees evaluating whether a secondary sale is appropriate for their situation, the process typically begins with a review of vesting documentation and the company’s share transfer policy. Not all ESOP agreements permit secondary transfers without company consent, and some contain right-of-first-refusal clauses that require the company to be offered the shares before an external sale proceeds.
Assuming the transfer is permissible, the next step is obtaining a market valuation. Altius Investech derives valuations based on the company’s last known funding round, secondary transaction history, and current buyer demand — providing a data-grounded basis for the pricing rather than an arbitrary estimate.
Once a price is agreed upon, the transaction is structured through a formal share purchase agreement. Any required corporate approvals are obtained, and the shares are transferred through the NSDL or CDSL depository system. Funds are released upon confirmation of the transfer.
The process is entirely legal and documented at every stage. Tax obligations — including the distinction between perquisite tax on exercise and capital gains tax on sale — should be reviewed with a chartered accountant before proceeding, as individual circumstances vary.
A Considered Approach to ESOP Liquidity
ESOPs represent genuine, earned value. For employees in India’s startup ecosystem, understanding the full range of options for accessing that value — not just the IPO route — is an important part of sound financial planning.
Secondary exits are not appropriate for every ESOP holder in every situation. For those at companies with strong, near-term IPO visibility and limited personal liquidity needs, holding through the listing may be the right choice. For those facing financial priorities, concentrated risk in a single illiquid asset, or uncertainty about their company’s public listing prospects, a secondary sale through a regulated, transparent intermediary deserves serious consideration.
Altius Investech facilitates this process for employees across India’s startup ecosystem. For those seeking to understand the current market value of their ESOPs or explore exit options, further information is available at altiusinvestech.com.