Paytm a professionally managed firm with no promoter, even after founder's 19% stake

Paytm, the Indian digital payment giant, has taken a step in reshaping its ownership structure with the company announcing that Antfin (Netherlands) has reduced significant shareholding in it. CEO Vijay Shekhar Sharma agreed to purchase 10.3 per cent of the company's shares from Antfin (Netherlands) Holdings BV. There has been no upfront cash payment, it will be paid during the time of OCD redemption.

The move highlights Founder and CEO Sharma's strengthened position, establishing him as the single largest shareholder.

In an exchange filing, Vijay Shekhar Sharma, Founder and CEO of One 97 Communications Limited, and Antfin (Netherlands) Holding B.V. announced execution of an agreement for 10.3 per cent stake in the company. This has significantly reduced Chinese shareholding in the homegrown company and founder and established CEO Sharma as the single largest shareholder of Paytm.

Proxy firm IiAS has addressed the issue asking whether this move elevates Sharma to give him the promoter status.

However it does not. After the transfer of shares, Sharma would continue as Managing Director and CEO. More importantly, Paytm remains a professionally managed company with no identifiable promoter. For anyone to be a promoter, their shareholding has to be above 25 per cent. In Paytm's case, Sharma's stake after the closure of the deal will stand at 19.42 per cent.

Sharma's move and the response it has received, continues to show the trust and confidence shareholders have on him. IiAS in its report has also highlighted the same. “Vijay Shekhar Sharma revolutionized mobile payments in India through One 97 Communications Limited (Paytm). All through these years, investors have backed him for his ideas and the belief that he alone will drive the business and deliver punchy numbers. This is evidenced by the overwhelming support to his reappointment as managing director and CEO at the companies AGM in 2022,” said the report.

In fact, after the announcement by the company on Monday, brokerage firms BofA and Dolat Capital recognised the move as positive for company fundamentals.

"Sharma buying the stake at Friday's close indicates his confidence in the story with a 'skin in the game' approach," BofA Global Research said in a note.

Aligned with SEBI rules, Paytm is a professionally managed company, where no shareholder can have special rights.

On the business side, Paytm continues to impress with its strong numbers. In the quarter ending June 2023, Paytm's revenue from operations has seen a growth of 39 per cent YoY to Rs 2,342 crore and its EBITDA before ESOP cost has improved to Rs 84 Cr as compared to Rs 52 Cr in Q4FY23 (excluding UPI incentives). Driven by an increase in merchant subscription revenue, jump in GMV, and growth in loan disbursements, the company's strong growth momentum continues.

Paytm attributes its robust growth to multiple factors, including increased merchant subscription revenue, a substantial rise in GMV (Gross Merchandise Volume), and significant growth in loan disbursements.

His overall shareholding in Paytm, both direct and indirect, will climb to 19.42 per cent following the completion of the off-market transfer.