Majority Of Paytm's Institutional Shareholders Veto ESOP Plan

Over 67% of the institutional votes cast were against three ESOP-related proposals on Feb. 19.

<div class="paragraphs"><p>An advertising balloon for PayTM online payment advertisment is displayed. (Photographer: Dhiraj Singh/Bloomberg)</p></div>
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Stock option plans proposed by Paytm's parent company One97 Communications Ltd. faced resistance from institutional shareholders, with two-thirds of such votes cast being against them.

Over 67% of the votes cast by institutional investors were against each of the three ESOP-related proposals put to vote in a ballot concluding Feb. 19. All three were special resolutions, requiring support from atleast two thirds of the votes cast. They passed with almost 93% of the overall votes being in favour.

One97 is a widely held company with no promoter but large blocks are owned by China's Alibaba Group, Japan's Softbank and private equity investors. Institutional shareholders, such as foreign portfolio investors and mutual funds own 9.52% stake—6.17 crore shares—in the company. Of these, 83% of the shares were voted on.

The three resolutions had sought to:

  • Amend and ratify the pre-listing Employee Stock Option Scheme for 2019.

  • Extend benefits under the ESOP scheme 2019 to employees of subsidiaries.

  • Extend benefits of the ESOP scheme 2019 to employees of group companies.

The 2019 ESOP plan comprised 4.6 crore options, of which just over 3 crore had already been granted prior to Paytm's initial public offering in November last year.

Most of these options have been granted at Rs 9 apiece, which proxy advisory firm Institutional Investor Advisory Services said was at a "deep discount" to the fair market value. The proxy advisory firm had recommended voting against the resolutions as there was no clarity on the exercise price.

The voting pattern of institutions around ESOPs are similar to that of newly-listed startups like Zomato Ltd. and FSN E-Commerce Ventures Ltd. (parent company of Nykaa). IiAS had earlier said that low institutional holdings in both instances had ensured that the resolutions were passed.

ESOP schemes have been seeing increased pushback from institutional investors since last year. A separate analysis by IiAS had highlighted that a quarter of ESOP-related proposals in FY21 made by Nifty500 firms saw over half of the institutional votes cast against them. Yet, only 2% of them ended up being rejected.