Glossary
/ESOP
The Full Form of ESOP is Employee Stock Ownership Plan.
It is a benefit companies offer to their staff. The company gives you the right to buy their shares at a fixed, discounted price in the future.
It is crucial to understand the difference. An ESOP is not a direct share grant. You do not own the stock immediately. You only own the option to buy it later.
Why do companies do this? It is a retention strategy. They tie a portion of your future wealth to the company's success. If the company grows, the share price goes up. You get to buy at the old, cheaper price and keep the profit.
The main draw for employees is simple. You get to profit from the company's success without having to drain your savings to buy the shares outright.
Note: The tax rules and vesting periods get complicated. If you want to see the timelines, how the math actually works, and the real dangers, read our complete guide on What is ESOP.