Tag: ESOPs

Fintech startup Paytm is planning to more than double its employee stock ownership plan (ESOP) pool, as per a letter sent to its shareholders for an extraordinary general meeting (EGM) scheduled for September 2, ahead of its much-anticipated IPO.

The Noida-based firm has proposed to its shareholders an increase in the existing ESOP pool to 61,094,280 equity options at a face value of Re 1 each from the current 24,094,280 equity options. The fintech company has also sought approval of founder and chief executive Vijay Shekhar Sharma’s revised employment agreement as the managing director and chief executive of the company.

Additionally, the company is formalising three appointments to the board of directors. These are Neeraj Arora, former chief business officer of WhatsApp and Ashit Ranjit Lilani, managing partner of Saama Capital, as non-executive independent directors; and Douglas Feagin, senior vice president, Ant Group, as a director.

The company has also put forth revised annual remuneration agreements for independent directors on the board for shareholders’ consideration. These include those of Mark Schwartz and Pallavi Shardul Shroff for Rs 1.85 crore and Ashit Ranjit Lilani and Neeraj Arora for Rs 1.48 crore.

ET has reviewed a copy of the letter.

In its previous EGM on July 12, the firm had passed several resolutions, including an IPO raise, and one declassifying Sharma as the promoter to list as a professionally managed company. Listing as a professionally run business could help smoothen Paytm’s IPO process as it reduces the compliance burden from investors and individuals that are considered promoters.

Also Read: Paytm founder to have protective rights after listing

Paytm’s ESOP expansion comes at a time when several leading tech and internet startups have offered lucrative buyback windows to help employees vest their options. In 2021, startups such as Zerodha, Razorpay, Cred, Acko, Udaan have given their employees windows to cash their stock options as valuations of India’s internet startups continue to rise rapidly.

ESOPs are an employee benefit plan that gives the firm’s employees ownership in the company in the first of stock options. Among growth-stage startups, ESOP plans are seen as an effective way to attract, retain and reward workers in a highly competitive talent market.

Paytm in July had filed a draft red herring prospectus with the markets regulator, the Securities and Exchange Board of India (Sebi), to raise Rs 16,600 crore ($2.2 billion) through a public issue in what will be one of the biggest Indian IPOs in at least a decade.

Also Read: Paytm and the art of going public

The stock offering will comprise a fresh issue worth Rs 8,300 crore ($1.1 billion) and a secondary issue or an offer for sale (OFS) of the same size, Paytm has told Sebi. The company may also consider a pre-IPO funding round of up to Rs 2,000 crore. If that happens the size of the fresh issue will be adjusted accordingly, the DRHP says.