IiAS raises question on Vijay Shekhar Sharma's promoter status in Paytm

International Investors Advisory Services (IiAS), an advisory firm, has raised questions regarding whether Paytm founder and CEO Vijay Shekhar Sharma should be classified as the company's promoter. This comes in the wake of a 'no-cash deal' announced involving Sharma and Antfin (Netherlands) Holding B.V.

The recent transaction will increase Sharma's shareholding in Paytm to 19.42 per cent after he acquires an additional 10.30 per cent from Antfin, thus making him the company's largest shareholder. Furthermore, the Sharma Family Trust holds an additional 4.88 per cent in the company, managed in the name of Axis Trustee Services.

"We continue to believe that Vijay Shekhar Sharma will have influence over how the 4.88 per cent equity held by the trust will vote on shareholder resolutions, giving him effective control of 24.3 per cent of the voting rights," the firm stated.

IiAS has asserted that the deal not only demonstrates investors' faith in Sharma but also highlights regulatory gaps in the definition and distinction between a founder and a promoter.

In the transaction, Resilient, a wholly-owned subsidiary of Sharma, will issue optionally convertible debentures (OCDs) to Antfin, allowing it to retain the economic value of the 10.30 per cent stake.

This deal is considered unusual as Sharma will receive voting rights while the economic gains go to Antfin. Moreover, this transaction has removed the influence of a Chinese-backer on Paytm's board, which may smooth its path towards acquiring a banking licence.

"It's time Vijay Shekhar Sharma formally signals that he remains in control. He needs to give investors the comfort that he is the promoter and not someone who is sitting in the shadows," IiAS added.

The value of the 10.3 per cent stake that Sharma is poised to acquire is estimated at $628 million, based on the closing price as of August 4, 2023. This means that Antfin will transfer nearly 65 million shares of the fintech giant to Sharma's overseas entity. Notably, Sharma will not pay anything to Antfin for this transaction.