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Paytm Founder and CEO Vijay Shekhar Sharma (File photo).
SEBI has banned Paytm Founder and CEO Vijay Shekhar Sharma from taking new eSops for 3 years under settles in ESOPS (Employee Stock Options) case. With this, ESOPS has been canceled to the given of One97.
SEBI has also imposed a fine of ₹ 1.11 crore on both Paytm and Vijay Shekhar. Apart from this, the company’s CBO Ajay Shekhar Sharma has been fined ₹ 57.11 lakh. Ajay will also have to return ₹ 35.86 lakh earned by selling 3,720 shares from ESOPS.
Vijay surrendered 2.1 crore Esops
Earlier on 16 April, Vijay Shekhar Sharma surrendered 21 million, ie 2.1 crore Employee Stock Options (ESOPS) found in 2019. SEBI issued a show cause notice in 2024 on violation of the rules for giving share-based employees benefit.
In August 2024, the Security Exchange Board of India (SEBI) stated that giving a 2.1 million employee stock option (ESOPS) to Vijay Shekhar Sharma, a violation of its rules controlling share-based employee benefits. According to Indian rules, large shareholders who have the ability to influence the company’s decisions cannot have Esops.
ESOP or Employee Stock Overnship Plan is a plan in which the company offers its employees shares of the company which are usually at a lower price than the market value. It is a kind of employee benefit that gives Employees a stake in the company.
Understand the whole matter in 5 points …
- In November 2021, Paytm raised ₹ 16,600 crore in one of the largest IPOs in India. Prior to the IPO, Paytm increased its ESOP pool from 24 million to 61 million to reward Sharma and other employees. ESOP was given only ₹ 9 per share compared to an IPO price of ₹ 2,150.
- When Paytm filed his IPO documents, Sharma was classified as a non-promoter instead of a promoter. Paytm described himself as a professional managed company, which has no identifiable promoter. It is allowed under SEBI rules, if an individual or institution does not have a clear control over the company.
- Due to this classification, Sharma got 21 million ESOPs in 2019, which cost about $ 500 million (about Rs 4250 crore) at the time of IPO. SEBI argued that Sharma’s influence and control over Paytm suggests that he should have been classified as a promoter, incapacitating for the ESOP.
- SEBI rules prevent promoters and directors with more than 10% shares (direct or indirect) of a company from receiving ESOPs. In such a situation, Sharma reduced from 14.7% to 9.1% to keep his shareholding less than 10% before the IPO. He transferred these shares to Axis Trustee Managed Family Trust.
- In January 2023, the Proxy Advisory Firm Institutional Investor Advisory Services (IIAS) said that Sharma has not classified himself as a promoter, despite he is enjoying rights like Permanent Board seat. IIAS argued that his control over Paytm, his direct (9%) and indirect (4.7%through the Sharma Family Trust), in collaboration with shareholding, violates the 10%limit.
Both Vijay and Ajay left Esop
- Vijay Shekhar has surrendered 2.1 crore esops which was given to him in 2019.
- Vijay Shekhar Sharma’s brother Ajay Sharma has also left 2.25 lakh eSops.
- Vijay will not take any new ESOP for the next three years.
- Ajay Sharma has also paid an amount of Rs 35 lakh to SEBI.
- The value of these universed esops is currently around ₹ 1,800 crore.
- They have been returned to the ESOP pool of Paytm.
ESOP Expend will increase by ₹ 492 crore in the fourth quarter
The filing states that ESOP Expend will increase by ₹ 492 crore in the fourth quarter of FY 2025 and ESOP Expans will decrease in future years.
Paytm said that the company will share details on its ESOP cost schedule with its Q4 FY 2025 results.
Paytm loss of ₹ 208 crore in third quarter
Paytm’s parent company One 97 Communications has reduced the net loss to Rs 208 crore in the third quarter (October-December) of FY 2024-25.
Paytm’s deficit in the same quarter of a year ago was Rs 220 crore. The company’s revenue fell 36% to Rs 1,828 crore in the October-December quarter. It was Rs 2,850 crore in the same quarter of a year ago i.e. Q3Fy24.
In the second quarter, Paytm had a net profit of ₹ 930 crore, the movie ticketing business brokery had a lump sum of ₹ 1,345 crore to the company’s net profit. Except for this amount, Paytm had a loss of ₹ 415 crore.
Paytm started in 2009
Paytm Payment App was launched by Paytm’s parent company One 97 Communications in August 2009. Its founder is Vijay Shekhar Sharma. At present, Paytm has more than 30 million users in the country. The market cap of Paytm is about 28 thousand crores.
