Following a study by an advisory group opposing its leader Vijay Shekhar Sharma’s reappointment as CEO and casting doubt on the company’s road to profitability, shares of One97 Communications, the parent company of Paytm, dropped by close to 5% on Friday.
Separately, Paytm said its loan disbursals increased four times to 2.9 million in July on Friday. The loan amount increased to $2,090 crores, a more than sixfold increase.
Paytm’s stock did not, however, recover as a result. On the BSE, Paytm shares decreased 4.82% to 786.
The company’s shares fell after Institutional Investor Advisory Services India Ltd. (IiAS) objected to Paytm’s request to extend Vijay Shekhar Sharma’s tenure as CEO for another five years. The advice firm highlighted the chosen salary for the position in a thorough report.
According to the IiAS analysis, Sharma’s expected compensation for FY23 is $796.28 crores, which includes 21 million stock options. In addition, an exercise price of 9 or a significant discount from the grant date market price (fair value spread over the vesting period). A further 46.5% of the stock option pool, or 3.2% of the existing share capital, was given to him. The vesting terms, however, are not disclosed, according to the study.
The proxy advisor rejected the request to re-appoint Ravi Chandra Adusumalli as a director. Further, the founder and managing partner of Elevation Capital (formerly SAIF Partners), which made an early investment in Paytm, is Adusumalli. However, the report expressed approval for Madhur Deora’s nomination as a full-time director but was concerned over his compensation. Since 2016, Deora has been an ally to Paytm. He was previously with Citigroup Global Markets India.
The company’s stock price declined by 64%, destroying the shareholder’s value (from the issue price of 2,150). In the June quarter, Paytm’s net loss increased to 644.4 crores, up from a loss of 380.2 crores in the equivalent quarter of the previous fiscal year.
In addition, the IiAS study expressed worry over loans totalling 106.8 crores to five firms with neglected repayments. SoftBank Group Corp. announced the reduction of its investment in Paytm by $400 million for the quarter ended in June, adding to the period’s total loss of $23.1 billion.
In 2017, the technology company invested $1.4 billion in One97 Communications through a combination of main and secondary share purchases.
According to its financial statement, the fair value of its investment was $1 billion at the end of June. It resulted in an on-paper loss of $400 million.
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