Paytm Seeks to Expand its ESOP Pool Prior to IPO

Paytm is planning to expand the company’s employee stock ownership plan or ESOP. This news comes after the fintech firm sent a letter to its shareholders calling for an extraordinary general meeting on 2 September 2021.

Here are the Details of this Plan by Paytm

One97 Communications Ltd, Paytm’s parent company, has proposed to increase the company’s existing ESOP pool more than twice. As a result, it will expand its present 24,094,280 equity options to 61,094,280. Moreover, the increased equity options will have Re. 1 each of face value.

But what is an ESOP?

ESOP is a company’s employee benefit plan; wherein employees own shares in the firm. It can also be viewed as a strategy to effectively attract and retain talent in an extremely competitive market, especially for growth-stage start-ups.

As per its DRHP filed with SEBI, Paytm currently has 2 ESOP schemes, namely:

• One 97 Employee Stock Option Scheme 2019
• One 97 Employee Stock Option Scheme 2008

What Can Be the After Effects of This Move?

Paytm, by way of an increase in its ESOP pool, is expected to allocate options to its employees who have a significant contribution to the company’s growth. Therefore, it will allow the firm to recognise and reward its key employees.

In addition, through the scheduled extraordinary general meeting, Paytm will be seeking shareholders’ approval for appointment as well as the remuneration of its new directors. These include Neeraj Arora and Ashit Ranjit Lilani as the company’s non-executive independent directors. Moreover, Douglas Feagin will be appointed to the board as a director.

Furthermore, Paytm has proposed revised agreements for the annual remuneration of its independent directors. These annual remuneration agreements comprise Rs. 1.85 crores for Pallavi Shardul Shroff and Mark Schwartz. Additionally, these include Rs. 1.48 crores for Neeraj Arora and Ashit Ranjit Lilani.

The company’s ESOP expansion comes at a crucial time when the valuation of India’s tech and internet start-ups is on the rise. Moreover, numerous notable names in tech have extended lucrative buyback windows to their employees. For instance, firms like Razorpay, Udaan, Zerodha, Acko, and Cred have offered a window to employees for encashing their stock options.

Parting Thoughts

Paytm is planning to increase its existing employee stock ownership plan by more than double. The company aims to expand its ESOP pool to 61,094,280 equity options from the present 24,094,280 equity options.

This move comes before the company’s much-awaited initial public offering. In July 2021, Paytm had filed its DRHP with SEBI in a bid to raise Rs. 16,600 crores via an IPO. The stock offering will include a fresh issuance of shares worth Rs. 8,300 crores. In addition, an offer for sale or a secondary issue of the same size will take place later. Moreover, this IPO is seen as the biggest offer in the Indian stock market history in almost a decade.

Frequently Asked Questions

1. Is Paytm listed in NSE?

No, Paytm is not listed on any stock exchange.

2. When will Paytm IPO open?

Although the exact date remains unknown, it is expected that Paytm will launch its IPO by October 2021.

3. What is the lot size of Paytm IPO?

Information about Paytm IPO’s lot size is not available at the moment.

4. When is Paytm IPO allotment?

The company is yet to disclose the details of its IPO allotment.