'$150 Billion Locked In ESOPs’: Saurabh Mukherjea Warns Of Hidden Risks For India’s Executive Class

As much as $150 billion of wealth is locked inside ESOPs (Employee Stock Ownership Plan) across Bengaluru, Hyderabad, Pune and Mumbai. On paper, India’s executive class looks richer than ever, but the reality is different, according to Marcellus Investment Managers’ Co-Founder Saurabh Mukherjea.

In a new podcast, Mukherjea warned that concentrated ESOPs wealth creates hidden risk by limiting diversification.

“Across the high-rises of Bengaluru, Hyderabad, Pune, and Mumbai, a staggering $150 billion in wealth is currently tied up in ESOPs. On paper, India’s executive class has never been richer. But here’s the uncomfortable truth: Wealth you cannot diversify is a risk you cannot manage,” the investment firm shared in an X post, adding a short clip of Mukherjea from his podcast called - ‘Coffee and Investing with Saurabh Mukherjea’.

The post highlighted that wealth concentrated in ESOPs cannot really move. “Many professionals don’t realize that up to 60% of their life’s savings is concentrated in their employer’s stock. This creates a dangerous blind spot...,” the post added.

According to Mukherjea, there are four key psychological reasons for this concentration. These include loyalty bias, endowment bias, fear of taxes and status quo bias.

He explained that professionals often feel a strong sense of loyalty to their company, which delays action. Secondly, due to endowment bias, professionals feel that they should not touch the ESOPs, leading them to hold on longer than is financially prudent.

Mukherjea also explained that tax fears discourage selling. As professionals often worry about capital gains or other liabilities, they remain tied to company stock. He pointed out that due to status quo bias, many professionals tend to stick with their current holdings.

“The result of that is that people tend to leave ESOPs in their portfolio as they are…,” Mukherjea added.