For all the reasons given in other answers, ESOP is “high risk-high reward” in any part of the world.

In India, there’s the additional angle of Fringe Benefit Tax, which is payable at the time of applying to buy the shares, not after you receive it and sell it at said profit.

This can prove tricky at times.

To cite an example, if vesting price is INR 400 and the market price on the day of vesting is INR 500. Say ESOP holder has 1000 shares that she can buy. At the time of applying for them, she has to pay two amounts to the company: One, 1000 x INR 400 = INR 400K for the shares, which is obvious. Two, Tax Rate x 1000 x INR (500 – 400) as Fringe Benefit Tax. Company takes some time (could be 15 days) to transfer the shares to ESOP holder. By the time the share price may have fallen down from INR 500, but still FBT paid on higher amount is lost forever.

Overall, from the p.o.v of the employee, ESOP is a good form of bonus over and above compensation. However, given all the uncertainties around it, I wouldn’t treat ESOP as a part of CTC (as I understand some startups are trying to position it).

UPDATE DATED 5 FEBRUARY 2020:

There has been some update on tax incidence on ESOP in the recent Indian Union Budget announced on 1 February 2020.

I’m not aware of all the details but the reaction of the startup industry has been mixed, with some startups terming the new rules as positive and others saying it’s one step forward and two steps back.