Investor advisory firm recommends voting against key Paytm resolutions

One 97 Communications, the parent Company of Paytm is scheduled to hold it’s AGM on August 19, 2022.

Ahead of the meeting, Institutional Investor Advisory Services India (IiAS), a proxy advisory firm, has advised shareholders of One 97 to vote against some key proposed resolutions.

• Reappointment of Vijay Shekhar Sharma (VSS) as the MD – proposed resolution seeks to reappoint him as MD & CEO for 5 yrs from December 19, 2022.
  • IiAS attributed decline in Paytm’s stock price, high losses and VSS’s track record of not delivering on his promises (to turn company profitable) for the reason to vote against.
  • The advisory instead recommends the board to be professionalised.
• Approval of Sharma’s remuneration
  • as his overall remuneration is higher than the remuneration levels of all S&P BSE Sensex companies’ CEOs, most of which are profitable.
  • IiAS estimates that Sharma’s remuneration for FY23 is Rs 796.28 crore, which comprises 21 million stock options at an exercise price of Rs 9. This is a “deep discount” to the market price on the date of grant. He was granted 46.5% of the entire stock option pool, which is equal to 3.2% of the outstanding share capital.
  • “…the proposed remuneration as minimum remuneration will be paid to him even if the company continues to report losses,” it said, adding there were no disclosures regarding the vesting conditions relating to the stock option grants and thus, no alignment with the interest of shareholders.
• Reappointment of Ravi Chandra Adusumalli as director.
  • Adusumalli is MD of Elevation Capital and a nominee director of SAIF and Elevation Capital on the company’s board.
  • “He has attended 47% 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,” it said.
• Remuneration to Madhur Deora as a whole-time director designated as executive director, president and group chief financial officer for three years from FY23.
  • “There is no clarity or cap regarding future stock option grants. 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,” it said.
• Contribution to charitable trusts and other funds up to Rs 10 crore per annum.

Are these valid reasons and request?

Principally, all of them indeed are very valid reasons. One would normally not expect these kind of leniences in a listed entity.

Many of these new age listed loss making companies have least respect for corporate governance standards. Voices like IiAS are definitely worth paying attention to.

So would we see some real impact?

Unlikely.

Almost 3/4th of the shareholding is controlled by the likes of Saif, Softbank, Alibaba Group and VSS.