“Vijay Shekhar Sharma has made several commitments in the past to make the company profitable, however these have not played out. We believe the board must consider professionalising the management,” the proxy advisory firm said in a report ahead of Paytm’s annual general meeting on August 19.
IIAS said Paytm’s shares had fallen 63% from the issue price of Rs 2,150 per share, resulting in wealth destruction for shareholders. On Thursday, the shares closed 0.2% lower at Rs 825.50 on the BSE, about 62% below the IPO price.
“We take comfort in the board’s assertion that the company has an effective mechanism for succession planning for the orderly succession of directors and senior management personnel. We raise concerns that he (Sharma) is not liable to retire by rotation, and that he will get board permanency if he continues in a non-executive capacity following the end of his term as managing director,” the report said.
The recommendation report also said Sharma’s remuneration was overall higher than the remuneration levels of the CEOs of all S&P BSE Sensex company, most of which were profitable.
“The company is seeking shareholder approval for the proposed remuneration as minimum remuneration — which will be paid to him even if the company continues to report losses,” the report added. IIAS estimated Sharma’s FY23 remuneration at more than Rs 796 crore, which comprises stock options of 21 million at an exercise price of Rs 9, a deep discount to the market price on the date of grant (fair value spread across the vesting period).”
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He was granted 46.5% of the entire stock option pool, which is equal to 3.2% of the outstanding share capital. There is no disclosure regarding the vesting conditions relating to the stock option grants and thus, no alignment with the interest of shareholders, it said.
At the annual general meeting, the company is scheduled to discuss the appointment of Elevation Capital’s Ravi Adusumalli as a director and reappointment of group chief financial officer Madhur Deora, apart from seeking shareholders’ approval for the remuneration and reappointment of Sharma.
If shareholders approve, Sharma is expected to take home Rs 4 crore in remuneration for the financial year, including benefits such as company-leased accommodation.
IIAS has also opposed Paytm president and group CFO Deora’s remuneration, but is in favour of his reappointment.
It also opposed the reappointment of Adusumalli, managing partner of early Paytm investor Elevation Capital, on the company’s board.
“He has attended 47% (9 out of 19) board meetings in FY22. We expect directors to take their responsibilities seriously and attend all board meetings, and at the very least 75% board meetings,” the report said, adding that Vivek Kumar Mathur, who is an alternate director to Adusumalli, had also attended nine meetings. “We believe that elected directors must attend board meetings, either via teleconference or video conferencing solutions, instead of relying on alternate directors,” it said.
Paytm’s consolidated loss widened to Rs 645.5 crore in the fiscal first quarter from Rs 381.9 crore a year earlier. The company said losses reduced by 15% sequentially, compared to Rs 762.5 crore in the quarter ended March 31, 2022.
Total income grew 88% year-on-year to Rs 1,781.6 crore for the April-June quarter. On a sequential basis, the growth was slower at 8%.
Revenue from operations was Rs 1,679.6 crore in the quarter ended June 30.
