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Gave Up ₹492 Cr in Shares—Here’s Why I Had No Choice: Founder ESOP Controversy Could Trigger New Compliance Wave Across Indian Startups
In a significant turn for Paytm, CEO Vijay Shekhar Sharma has given up 21 million ESOP shares valued at ₹492 crore. This follows action by the Securities and Exchange Board of India (Sebi), which questioned how the shares were granted.
Controversy Over ESOP Eligibility Before Paytm IPO
The shares, tied to the One97 Employees Stock Option Scheme of 2019, were offered to Sharma ahead of Paytm's IPO. At that time, Sharma lowered his promoter stake below 10% by moving shares to Axis Trusteeship, hoping to meet the eligibility rules for ESOPs. Sebi, however, flagged this move as misleading and in breach of regulations that bar promoters from receiving such grants.
ESOP Cancellation and Financial Impact
On April 16, Sharma informed the company he would give up the unvested shares. Paytm canceled them and returned the options to the ESOP pool. The forfeiture creates a one-time non-cash cost of ₹492 crore in the final quarter of FY25. This expense will ease future accounting charges, helping smooth Paytm’s financial path ahead.
Settlement with Sebi and Future ESOP Restrictions
In a parallel move, Sharma, his brother Ajay Shekhar Sharma, and Paytm have jointly agreed to pay ₹2.79 crore in penalties to Sebi. This agreement settles the case without either accepting or denying wrongdoing. In addition, Vijay Shekhar Sharma has promised not to accept any new ESOPs for the next three years.
Paytm’s Struggles Amid Banking Unit Restrictions
This move comes at a crucial time for Paytm. The company is still reeling from regulatory restrictions placed on Paytm Payments Bank by the Reserve Bank of India. With its banking unit barred from serving customers, Paytm is now focusing on its core offerings—digital payments, lending, and financial services.
Quarterly Loss and Revenue Drop
The closure of the recent quarter results in Paytm's account reflecting a net loss of ₹208 crore. Revenue shrank by 36%, at ₹1,828 crore. At this time, the firm is working to re-establish trust with investors and limited business momentum.
Stock Recovery and Governance Reforms
The greenhorns in Paytm stock reeling under the regulatory storm closed at ₹864, bidding nearly 3% on the BSE. According to market observers, such forfeiture is painful but signals intent to clean up governance issues and regulatory alignment.
Move for More Caution Down the Line for Accountability from Fintechs
As a maneuver that supports a broader shift toward accountability in Fintech, the surrender of ESOPs by Vijay Shekhar Sharma adds a fresh chapter to the changing corporate scenario of India, where founder-led organizations are facing the wrath of the corporate governance watchdogs. A shift towards transparent governance is reflected in this crucial turn of events.