Paytm’s stock has been floundering since its listing last year, and now rumblings have begun about the performance of its top management.
Proxy Advisory firm IiAS has opposed the reappointment of Vijay Shekhar Sharma as Paytm CEO, and has advised its shareholders to vote against his reappointment. “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 firm said in a report. IiAs is an advisory firm that provides participants in the Indian market with independent opinions, research and data on corporate governance, as well as voting recommendations on shareholder resolutions.
“Asking for the removal of a founder is a recommendation that we don’t make easily,” IIAS’s Amit Tandon told CNBC-18 in an interview. “A lot of discussion and debate went into the report. But at the end of the day, there were a couple of red flags (about his reappointment),” he added.
One of the chief factors which caused IIAS to oppose Sharma’s reappointment was his compensation. “Vijay Shekhar Sharma is getting Rs. 6 crore as fixed pay, but he also gets Rs. 790 crore of stock options per year for 5 years, which is around Rs. 4000 crore. That’s a fairly large sum of money,” he added. “If this is the kind of incentive that’s being paid out to him to turn around the business, then the question to be asked is, what’s he been doing all along?”
“He’s no longer a promoter. Why should shareholders think he has a generational view and should be allowed to continue?” he added. “It’s time for shareholders to take a hard look at this,” Tandon said.
The IIAS report had pointed out that Vijay Shekhar Sharma had been saying for years that Paytm would become profitable, but the company was no closer to profitability. “From 2015, to 2020, to 2022, Vijay Shekhar Sharma has had moving targets on when the company would be profitable. Even though he’s the founder and he’s created the business, he’s not fully in control,” Tandon said.
Tandon said that Paytm had passed several resolutions which would essentially give Sharma a permanent spot on the board, even if his shareholding in the company halved. “These are signs that a person is trying to entrench themselves in the company. Why would shareholders vote out a person who’s performing well? This only happens when the person is not in a position to deliver,” he added.
IiAS even went on to say that Paytm should appoint a successor. “The board has already signed off on a well-defined succession plan, and they should trigger it,” he said.
Tandon even hinted that there were several “videos” on YouTube which raised questions about Sharma’s ability to lead Paytm. “If you look at some videos which are available on YouTube, is Vijay Shekhar Sharma in control? Does he understand which way the company is heading? Is he the right person to lead the company? Our answer was no,” he said. Several years ago, videos of an animated Vijay Shekhar Sharma at Paytm’s annual party had gone viral, which showed him making wild claims, using foul language and screaming and dancing at the event.
This is a pretty damning assessment, and could cause many shareholders to question Vijay Shekhar Sharma’s ability to lead Paytm. There had been simmering resentment against the company for its overpriced IPO, which led to the Paytm stock to immediately collapse, and lose retail investors hundreds of crores. Paytm’s stock has still not recovered, and currently trades nearly 70% below its IPO price. These are still early days, and a report by an independent body isn’t binding on shareholders, but these rumblings about his removal will weigh heavy on Sharma has he tries to claw back Paytm’s stock prices from the lows of early this year.