Paytm’s CEO Vijay Shekhar Sharma has made a significant move by voluntarily relinquishing all 2.1 crore employee stock option units (ESOPs) allocated to him. This decision, announced in an exchange filing on Wednesday, reflects Sharma’s commitment to the company’s governance and transparency. The parent company, One 97 Communications Ltd, confirmed that Sharma requested the cancellation of his ESOPs with immediate effect, a request that received prompt approval from the company’s nomination and remuneration committee.

Key Details of the ESOP Cancellation

• Immediate Effect: Sharma’s request to forego the ESOP units was effective immediately upon approval.
• Board Approval: The nomination and remuneration committee convened to discuss and approve the cancellation.
• Impact on Financials: This cancellation will lead to a one-time, non-cash expense of Rs 492 crore for the quarter ending March 31, 2025, while also reducing future ESOP expenses.

In its filing, Paytm stated that the unvested ESOP units had been returned to the ESOP pool under the One 97 Employees Stock Option Scheme, 2019. Additionally, the company indicated that it would provide a detailed schedule of the ESOP costs alongside its Q4 FY 2025 results.

Regulatory Scrutiny in Focus

This decision comes on the heels of scrutiny from the Securities and Exchange Board of India (SEBI) regarding the issuance of ESOPs to Sharma prior to Paytm’s initial public offering. In FY 2021-22, Sharma was granted these ESOPs with plans for them to vest over a five-year period. However, concerns were raised about the legality of this issuance, as SEBI regulations prohibit ESOPs from being granted to promoters.

The Institutional Investor Advisory Services India Ltd flagged potential regulatory violations in January 2023, questioning whether proper protocols were followed. In response, Paytm asserted its belief in compliance with all applicable regulations, supported by an independent legal opinion.

Vijay Shekhar Sharma’s Shareholding

As of the end of March 2025, Sharma’s stake in One97 Communications stands at 9.1% directly, supplemented by an additional 4.87% through a trust managed by Axis Trustee and a 10.27% stake through Resilient Asset Management BV, in partnership with Antfin (Netherlands) Holding BV. Cumulatively, this gives Sharma a 24.24% equity stake in the company, reflecting his significant influence.

Recent Challenges for Paytm

Last year, Paytm faced regulatory actions against its banking subsidiary, Paytm Payments Bank, which was reprimanded by the Reserve Bank of India for failing to comply with regulations. This incident adversely affected the company’s banking and wallet services, subsequently impacting its stock performance.

In conclusion, Vijay Shekhar Sharma’s decision to forgo his ESOP units underscores his focus on corporate governance. As Paytm navigates regulatory challenges and financial adjustments, this move may strengthen investor confidence in the company’s commitment to transparency and compliance.

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