IiAS has raised two questions over Sharma’s eligibility for receiving Esops — whether or not he meets the definition of a promoter of the corporate beneath Sebi’s guidelines, and if his mixture shareholding, together with each direct and oblique, is lower than 10%.
In its be aware, IiAS has identified that though Paytm’s father or mother firm One 97 Communications Ltd doesn’t categorise Sharma as a promoter, the provisions within the firm’s Articles of Association give him rights which might be sometimes seen in additional conventional firms for his or her promoter households. These embrace potential permanency on the corporate’s board, it mentioned.
“Paytm granted Vijay Shekhar Sharma 21 million stock options in FY22 (larger than the size of the buyback announced on December 13, 2022). These stock options can be exercised at Rs 9 per share: the fair value of stock options granted aggregates about Rs 3,960 crore ($495 million), which is higher than the compensation of all of S&P BSE Sensex CEOs put together,” IiAS mentioned.
“There is no public disclosure on the rationale for such a grant, whether this will be a one-time grant, and whether Vijay Shekhar Sharma will receive more stock option grants in the future,” it added.
On the difficulty of Sharma’s shareholding, IiAS cited the Companies (Share Capital and Debentures) Rules, 2014 beneath the Companies Act, which state that Esops can’t be granted to a director of the corporate who holds greater than 10% within the firm straight or not directly — by self, a relative, or a company physique.
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The proxy advisory agency additionally identified that Paytm’s crimson herring prospectus reveals that prior the corporate’s IPO in 2021, Sharma lowered his shareholding by 30.97 million shares, and Axis Trustee Services Ltd, performing on behalf of the Sharma Family Trust, acquired 30.97 million shares of the corporate.
“As a result, his direct equity shareholding at the time of the IPO reduced to 9.1% (well below his 14.7% equity a year ago),” it mentioned. Together with Axis Trustee Services Ltd, on behalf of the Sharma Family Trust, he holds nearly 14% stake in One 97 Communications.
“Sebi needs to consider if Vijay Shekhar Sharma’s direct equity and that held on behalf of Sharma Family Trust ought to be aggregated to test for compliance with the 10% threshold set out in both, under Indian regulations and Paytm’s Esop scheme,” it added.
Paytm didn’t reply ET’s queries on the IiAS be aware.
In August 2022,
IiAS had suggested shareholders of One 97 Communications to vote towards the reappointment of Sharma as its chief govt, and his remuneration.
At the time, IiAS had flagged that Paytm’s shares had fallen 63% from the difficulty value of Rs 2,150 per share, leading to wealth destruction for shareholders. On Friday, the corporate’s shares ended at Rs 550.70, nearly 75% down from its IPO value.
Later that month,
the corporate mentioned that 99.67% of its shareholders who voted on the decision at its annual normal assembly accredited reappointment of Sharma as managing director of the corporate for 5 years from December 19, 2022 till December 18, 2027.
Last month,
the board of One 97 Communications accredited buyback of shares price as much as Rs 850 crore at a most value of Rs 810 apiece by way of the open market route. Through the method, Paytm plans to purchase again 10.49 million shares, which symbolize roughly 1.62% of its paid-up share capital, as of FY22-end.
In addition to questioning Paytm’s Esop scheme, IiAS mentioned that “several founders may be playing the regulatory arbitrage between the rights akin to a promoter versus the financial gains of not being classified as one”.
“Regulations need to catch up to these structures,” the proxy advisory agency famous.