When will Vijay Shekhar Sharma be classified as a promoter, asks Amit Tandon, Managing Director, IiAS

9 Aug 2023 , 05:18 PM

After the recent transaction, Vijay Shekhar Sharma together with the equity holding of the family trust, is arguably in control of 24.3% of voting rights. The deal demonstrates investors faith that he will deliver the numbers. The transaction also highlights the regulatory gaps in the definition and classification between founders and promoters.

The recent transaction between Antfin (Netherlands) Holding B.V. (Antfin) and Vijay Shekhar Sharma allows Vijay Shekhar Sharma control over another 10.30% voting rights of One 97 Communications Limited (PayTM). This will take his direct voting rights to 19.42%. A further 4.88% equity is held by the Sharma Family Trust, in the name of Axis Trustee Services.

IiAS flagged this in January 2023, when we asked if the Sharma Family Trust’s equity should be considered as Vijay Shekhar Sharma’s shareholding. We continue to believe that Vijay Shekahr Sharma will have influence over how the 4.88% equity held by the trust will vote on shareholder resolutions, giving him effective control of 24.3% of the voting rights.

Vijay Shekhar Sharma revolutionized mobile payments in India through One 97 Communications Limited (Paytm). All though these years, investors have backed him for his ideas and the belief that he alone will drive the business and deliver punchy numbers. Despite the significant erosion in shareholder wealth from the listing price or that the company burns cash and is yet to show profitable growth, or that many believe he is overpaid, investors have not soured on him. This is evidenced by the overwhelming support to his reappointment as managing director and CEO at the companies AGM in 2022. The investor vote last year has further cemented Vijay Shekhar Sharma’s role in the company.

Vijay Shekhar Sharma is the present Chairperson, Managing Director and CEO, as a director, he is not liable to retire by rotation, and he has the right to a board seat for as long as he holds an executive capacity. He has remained central to the various shareholders’ agreements since the time the company embarked on its current journey. He owns 51% of PayTM Bank, the payment bank in which PayTM holds 49%, through which PayTM offers banking services, wallet, net banking and other financial related products and services to its customers. Even in the current transaction, Antfin preferred to gift its votes to Vijay Shekhar Sharma over a market sale of its shares.

Its time Vijay Shekhar Sharma formally signals that he remains in control. He needs to give investors the comfort that he is the promoter and not someone who is sitting in the shadows. Afterall, Vijay Shekhar Sharma is the glue that continues to hold the company together. If this is not control, then what is?