All three domestic voting advisory firms - Institutional Investor Advisory Services (IiAS), Stakeholders Empowerment Services (SES) and InGovern Research Services have opposed the proposal to reappoint Vijay Shekhar Sharma as the Chief Executive Officer (CEO) of Paytm for another five years.
The firms have also opposed the remuneration decided for the position -- an amount higher than any of the Sensex 30 executives. They have advised the shareholders of the company to vote against the move.
In its recommendation report that 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 said: “Vijay Shekhar Sharma has made several commitments in the past to make the company profitable, however, these have not played out. We believe the board must consider professionalising the management.”
The report added: “We take comfort in the board’s assertion that the company has an effective mechanism for succession planning for the orderly succession of directors and senior management personnel. We raise 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.”
The advisory firm also 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. Further, Paytm posted net losses worth Rs 644 crore in the April-June quarter.
On that note, 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 report added.
As per IiAS estimates, Sharma is likely to pull a remuneration of over Rs 796 crore in FY23, including 21 million stock options at Rs 9 exercise price.
“Sharma was granted 46.5 percent of the entire stock option pool, which is equal to 3.2 percent of the outstanding share capital. There is no disclosure regarding the vesting conditions relating to the stock option grants and thus, no alignment with the interest of shareholders,” the advisory firm added.
Further, the report highlighted that though Sharma has spoken several times about Paytm becoming profitable someday, his statement has not seen fruition.
“Vijay Shekhar Sharma has moved the floodgates again and promised an operating margin (EBITDA net of ESOP expenses) for the quarter ending September 2023 — that the company has come up with its own definition of operating margin that we do not support,” it said.