Paytm In Trouble As Advisory Body Opposes Vijay Shekhar Sharma’s Appointment; His Salary Is Too High?

Advisory firm Institutional Investor Advisory Services India Limited (IiAS) has opposed the reappointment of Vijay Shekhar Sharma as Paytm CEO for another five years.

They have advised the shareholders of the company to vote against the move.

Empty promises

The recommendation report comes ahead of Paytm’s annual general meeting on August 19, where the company is expected to seek shareholders’ approval for Sharma’s reappointment

IiAS reasoned its opposition saying that Sharma has made several commitments in the past to make the company profitable, however, these have not played out.

He once again promised an operating margin (EBITDA net of ESOP expenses) for the quarter ending September 2023.

“Professionalising the management”

It does not support how the company has “come up with its own definition of operating margin”.

Thereby it wants the board to consider “professionalising the management”.

In other words, IiAS’ Amit Tandon argued that they prefer a professional CEO for the company.

They also oppose Sharma’s outsized compensation.

Oversized compensation

It has opposed the remuneration decided for the position — an amount higher than any of the Sensex 30 executives.

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.

It is reported that Vijay Shekar Sharma earns Rs 6 crore as fixed pay.

“But he is also getting about Rs 790 crore worth of stock options — that’s the fair value of stock options for about five years. So, it’s just under Rs 4,000 crore. And we felt that for someone it’s a fairly large sum of money,” Tandon said.

Tandon said that since Paytm has a well-defined succession plan, the board should remove Sharma.

Underperformance

The report further raises concerns that he (Sharma) is not liable to retire by rotation, and that he will get board permanency if he continues in a non-executive capacity following the end of his term as managing director.

It further pointed out that Paytm’s shares have fallen 63.6 percent from their issue price of Rs 2,150 since the listing to Rs 825.50 on August 11, thereby eroding shareholder wealth.

Paytm posted net losses worth Rs 644 crore in the April-June quarter.

Seeking minimum remuneration

Because of these, the “company is seeking shareholder approval for the proposed remuneration as minimum remuneration – which will be paid to him even if the company continues to report losses”.

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 in the previous fiscal.