Hindustan Times ST (Jaipur)
Paytm to give ₹743 cr to CEO’S firms before IPO
The proposal will be put to vote at the company’s annual meeting on June 30
One97 Communications Ltd, the operator of the Paytm online payments app, is set to extend ₹743 crore funding to two companies owned by founder Vijay Skekhar Sharma ahead of its $3 billion initial share sale planned this year.
The proposal, among others, will be put to vote at the company’s annual meeting on June 30, according to a notice to Paytm shareholders, a copy of which has been reviewed by Mint. The note to the shareholders was sent after Paytm’s board meeting on May 28.
According to the proposal, Paytm will buy ₹491.93 crore worth of optionally convertible debentures to be sold by VSS Holdings Pvt. Ltd, in which Sharma is a director. VSS is short for Vijay Shekhar Sharma.
The debentures will mature in 10 years and bear annual interest of 15%. The funding will be done in one or more tranches, according to the note.
Paytm will own 96% in VSS Holdco on converting the debentures into shares, which can be done at any time.
Paytm said VSS Holdco will utilize the funds for its primary business activities. According to filings with the registrar of companies, VSS Holdco is involved in activities closely related to intermediation, except insurance and pension funding.
Paytm’s other proposal is to loan ₹250.79 crore to VSS Investco Pvt. Ltd through intercorporate deposits, or ICDS, in one or more tranches.
VSS Investco will have to repay the amount within 12 months or before Paytm’s IPO, says the note sent by Paytm to its shareholders.
Paytm said Sharma will raise external funding or sell his shares in the company to repay the loan. Paytm said this money, too, will be used for the principal business activities of VSS Investco.
Both VSS Holdco and VSS Investco were incorporated in January 2020 and are engaged in similar businesses.
Two-decade old Paytm is a leader in the payments space. It also provides utility bill payments, recharges, ticketing, hotel booking, and other financial services to consumers.
Paytm has also proposed to pay Sharma a salary of ₹4 crore a year, even though the company has recorded lower revenues and a loss in fiscal 2021, which the company attributed to restrictions on businesses due to the pandemic.
Paytm’s total revenue for fiscal 2021 has been recorded at ₹3,186.8 crore as compared to ₹3,540.77 crore in fiscal 2020, as per the company’s latest annual report.
The company’s loss has narrowed to ₹1,701.01 crore in fiscal 2021 from ₹2,942.36 crore in fiscal 2020.
Paytm’s board has approved
Sharma’s remuneration of ₹4 crore for fiscal 2022 and said that this will be the minimum compensation for Sharma regardless of the company’s financial performance, according to the note to shareholders.
Foreign investors hold 83.87% in One97 Communications, which is now trying to gain market share across a spectrum of financial services offerings by launching platforms to transact mutual funds, wealth management products, stocks, and insurance services.
The company has applied for a new umbrella entity licence as part of a consortium comprising Ola, Indusind Bank, Zeta, and Suryoday Small Finance Bank.
It has also applied for a general insurance licence.