Paytm helps employees exercise stock options
BENGALURU: One97 Communications Ltd, the parent of payments services provider Paytm, is in talks with five lenders to help employees borrow money to exercise their stock options before the company’s muchawaited initial public offering (IPO), two people aware of the discussions said.
Paytm wants to help employees pay for buying their vested options and make tax payments if required, the people said, requesting anonymity.
Stock options are taxed as a perquisite when the employee exercises the option to buy the stocks. The exercise price is the amount the employee pays to buy the vested options.
The difference between the fair market value of the shares on the date of exercising the options and the amount paid to exercise the option is taxed based on the salary bracket slab of the employee.
In addition, employees may have to pay capital gains tax if they choose to sell their shares.
“Paytm (One97) is in talks with financing institutions such as IIFL, ICICI Bank and Edelweiss Capital to help its employees convert their employee stock ownership plans into shares and provide them loans to pay for exercise price and tax payments. These loans are expected to be of the duration of 12 months,” said one of the people cited above.
It is expected to facilitate a loan size of around ₹100 crore towards this end, helping 300500 employees who hold stock options, the second person said. A One97 spokesperson declined to comment on the development.
“The One97 management is also in talks to absorb the interest costs of the loans being provided to employees. The final names of the lenders and total credit size is expected to be decided this week,” the second person said.
Lenders, including Edelweissbacked ECL Finance Ltd and ICICI Bank, provide these loans to customers to exercise their stock options.
“In case an employee fails to pay back, the lenders usually allow the individual to sell a portion of their shares to pay the loan. In case Paytm’s IPO is delayed, employees also have the option to sell their shares in the grey market to pay back the loan,” said a banker, requesting anonymity.
Paytm’s liquidity exercise comes at a time it aims to more than double its ESOP (employee stock option plan) pool to reward employees before its November-end IPO. In a letter to shareholders last week, the company said that it looks to alter the One97 Employee Stock Option Scheme 2019 by more than doubling its existing ESOP pool from 24.1 million equity options to 61.1 million at a face value of ₹1 each. The decision to expand its stock options pool will be put to the vote in the company’s extraordinary general meeting (EGM) on September 2, Mint reported earlier.
Since its inception, Paytm has formulated two ESOP schemes, One97 Employee Stock Option Scheme 2008 and One97 Employee Stock Option Scheme 2019, according to the draft share sale documents filed with the Securities and Exchange Board of India (Sebi) in mid-july.
Paytm is awaiting Sebi approval for its ₹16,600 crore initial public offering.