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Institutional Investor Advisory Services India (IiAS), a Mumbai-based proxy advisory firm, has advised Paytm (One97 Communications) shareholders to vote against the reappointment of Vijay Shekhar Sharma as the chief executive officer (CEO) for another five years. 

The report comes ahead of Paytm’s annual general meeting on August 19.

“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 report read.

It added, “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.”

Flagging remuneration

The recommendation report said the CEO’s remuneration was “overall higher” than the remuneration levels of the CEOs of all S&P BSE Sensex company, most of which were profitable. 

As per the report’s estimates, Vijay is likely to pull a remuneration of over Rs 796 crore in FY23, which comprises stock options of 21 million. 

It was pointed out that Paytm’s shares have fallen 63.6% from their issue price of Rs 2,150 since the listing to Rs 825.50 on August 11, eroding shareholder wealth. Further, Paytm posted net losses worth Rs 644 crore in the April-June quarter.

In such a scenario, “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 said.  

“Sharma 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 added.

Other reconsiderations 

The report opposed to remuneration of Paytm president and group CFO, Madhur Deora, whose reappointment would be discussed at the upcoming meeting besides opposing the appointment of Elevation Capital’s Ravi Adusumalli as a director. Ravi is a managing partner of Elevation Capital and a nominee director of the board at Elevation Capital.

The report, however, was in favour of Madhur’s reappointment. 

“He (Ravi) 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.

“We believe that elected directors must attend board meetings, either via teleconference or video conferencing solutions, instead of relying on alternate directors,” it added. 

A motion for contribution to charitable trusts and other funds up to Rs 10 crore per annum was also asked to be turned down.

July performance update

The company disbursed Rs 2.9 million total loan (including both consumer loans and merchant loans and excludes the number and the value of loans sourced by third parties, and aggregation of EMls on POS devices) during the month of July 2022 (y-o-y growth of 296%). 

Over 4.1 million devices were deployed while consumer engagement on Paytm Super App was highest to date, with average monthly transacting users (MTU) at 77.6 million for the month July 2022, up 41% y-o-y. 

At 10:17 am, Paytm shares were trading at 779.85, down by 5.56%.