The Institutional Investors Advisory Services has flagged Paytm’s proposals to reappoint Vijay Shekhar Sharma at the helm and offer higher pay than any of the Sensex 30 chief executives.
In its recommendation report for One97 Communications Ltd.’s upcoming annual general meeting, the proxy advisor is asking shareholders to vote against proposals to reappoint Sharma as managing director and chief executive officer for another five years, and fix his remuneration.
IiAS said since listing, the company’s stock has declined 63.6% from the issue price, which has resulted in wealth destruction for shareholders. The company also reported a net loss of Rs 644 crore in the quarter ended June.
“Vijay Shekhar Sharma has made several commitments in the past to make the company profitable, however, these have not played out. The board must consider professionalising the management,” it said.
Sharma has on several occasions publicly talked about Paytm turning profitable but it hasn’t happened. “Vijay Shekhar Sharma has once again moved the goalpost and promised operational profitability (Ebitda before ESOP costs) by quarter ending September 2023—that the company devised its own definition of operational profitability, a practice we do not support.”
IiAS also said Sharma was not liable to retire by rotation and will get board permanency if he continues in a non-executive capacity after his term as managing director ends. The proxy advisor has earlier flagged practices among companies where promoters get a permanent seat on the board to the detriment of shareholders.
Besides the reappointment, IiAS recommended voting against the proposed pay package for Sharma. According to Paytm’s AGM notice, the board wants to pay Sharma a minimum remuneration for three years from FY23 that would include fixed pay, perquisites and stock options that were granted with him previous fiscal.
According to IiAS, at Rs 796.3 crore, Sharma will take home way more pay than any of the CEOs leading companies in the S&P BSE Sensex index—most of which are also profitable. The estimated pay includes the fair value of the 21-crore stock options Sharma was given in FY22 and spread it out over the five-year vesting period to estimate the annual remuneration.
The stock options were also granted to him at Rs 9 apiece, a steep discount to the market price, IiAS said. “This does not align with the interest of shareholders.”
BQ Prime awaits Paytm’s response on IiAS’ recommendations.