Market Performance
Paytm’s parent company, One 97 Communications, released its financial results for the third quarter of FY2024-25, revealing significant changes in revenue and losses.
Financial Highlights (Q3 FY25)
- Revenue stood at ₹1,828 crore, showing a 36% decline from ₹2,850 crore in the same quarter of the previous year (Q3 FY24).
- The company reported a net loss of ₹208 crore, slightly narrowing from the ₹220 crore loss in Q3 FY24.
- In the second quarter of FY25, Paytm had posted a net profit of ₹930 crore, supported by a one-time gain of ₹1,345 crore from the sale of its movie ticketing business.
- After excluding the one-time gain, the adjusted net loss in Q2 FY25 was ₹415 crore.
- For the fourth quarter, the ESOP expense is expected to increase by ₹492 crore.
Main News
Vijay Shekhar Sharma, the founder and CEO of Paytm, has voluntarily surrendered 2.1 crore employee stock options (ESOPs) that were allocated to him in 2019. This move follows regulatory scrutiny from the Securities and Exchange Board of India (SEBI), which issued a show cause notice earlier in 2024. The regulatory body indicated that the allocation of these ESOPs was not in compliance with the rules for share-based employee benefits.
SEBI rules prohibit individuals classified as promoters or those with significant shareholding and influence from receiving ESOPs. In Sharma’s case, SEBI noted that despite his initial classification as a non-promoter, his control and influence over Paytm effectively positioned him as a promoter, making him ineligible for such benefits under existing norms.
Company Details
Paytm, launched in August 2009 by One 97 Communications, is currently used by more than 30 crore users in India. The company had its initial public offering (IPO) in November 2021, raising ₹16,600 crore. Prior to the IPO, Paytm expanded its ESOP pool from 24 million to 61 million. The ESOPs allocated to Sharma were priced at ₹9 per share, significantly lower than the IPO price of ₹2,150.
Sharma was initially listed as a public shareholder, not a promoter, during the IPO process—a classification permitted under SEBI regulations if no single individual or group holds clear control. However, SEBI later pointed out that Sharma’s overall influence, including his direct and indirect shareholding (via the Axis Trustee Managed Family Trust), exceeded the 10% limit allowed for ESOP eligibility.
Ajay Sharma, Vijay Shekhar Sharma’s brother, has also surrendered 2.25 lakh ESOPs and paid ₹35 lakh to SEBI. The total unvested ESOPs surrendered are valued at approximately ₹1,800 crore and have been returned to the company’s ESOP pool.
Summary of the Article
Vijay Shekhar Sharma has returned 2.1 crore ESOPs granted in 2019, following regulatory concerns raised by SEBI. His classification as a non-promoter during Paytm’s IPO came under review, as SEBI argued that his influence exceeded permissible limits for receiving ESOPs. His brother Ajay Sharma has also given up his ESOPs. These actions result in a one-time ESOP-related expense for the company, which will reflect in its Q4 FY25 financials. Paytm continues to navigate regulatory challenges while managing its financial performance amidst a changing business environment.
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