Shares of the parent company of Paytm, One 97 Communications, surged by 3.5% and reached a day’s high of Rs 548.70 on the BSE today. This notable growth occurred after the company’s address to the SEBI show-cause notice was purveyed to founder Vijay Shekhar Sharma and other past board members.
SEBI’s notice focused on an alleged breach of rules and regulations regarding Vijayt Sekhar Sharma's employee stock option plans (ESOPs).
One of India’s giant digital payment platforms, Paytm, in the financial year 2021-2022, accorded a considerable number of employee stock options (ESOPs) to its Chief Executive Officer and founder, Vijay Shekhar Sharma. Specifically, 21 million ESOPs were awarded to Sharma, contingent upon the successful attainment of certain predefined milestones set by the company. These stock options were part of a broader strategy to align the leadership’s incentives with the company’s long-term goals and to drive sustained growth and innovation within Paytm.
Fast-forward to the financial year 2023-24, Paytm found itself under the scrutiny of the Securities and Exchange Board of India (SEBI). SEBI issued a show-cause notice concerning the alleged non-compliance with regulations governing the ESOPs granted to Sharma. This notice raised questions about the adherence to SEBI’s rules regarding the issuance of stock options, a matter of significant importance given the potential impact on shareholder value and corporate governance standards.
Paytm had proactively disclosed the situation in its financial statements for both the quarter and year ending on March 31, 2024, and the subsequent quarter ending on June 30, 2024. These disclosures were made to ensure transparency with the shareholders and to keep the market informed about the ongoing regulatory issues. In its filings to the stock exchanges, Paytm emphasized that it is in continuous dialogue with SEBI, making the necessary representations to resolve the matter amicably and in compliance with the regulatory framework.
In response to the recent media reports surrounding the SEBI notice, Paytm issued a formal statement to the exchanges. The company clarified that the issue was not new and had already been addressed in its previous financial disclosures. The statement read, “Concerning recent media reports, we would like to inform you that this is not a new development, as the Company had already made relevant disclosures on this matter in its financial results for the quarter and year ended March 31, 2024, as well as the quarter ended June 30, 2024. The Company is in regular communication with the Securities Exchange Board of India (SEBI) and making necessary representations regarding this matter. Accordingly, there is no impact on the financial results for previous quarters ended June 30, 2024, and March 31, 2024, respectively.”
Despite the ongoing regulatory challenges, Paytm's stock has experienced a notable decline over the past year, with shares plummeting by 40%. In 2024 alone, the shares have fallen by 16.3%. However, the recent uptick in Paytm’s share price indicates that investors may be gaining confidence in the company’s ability to navigate through these regulatory hurdles. The market’s response suggests that stakeholders are beginning to look beyond the immediate concerns, focusing instead on Paytm’s broader efforts to address the issues at hand and continue its trajectory of growth and innovation.
