Paytm IPO: Founder Vijay Shekhar Sharma to have protective rights 

Founder Vijay Shekhar Sharma will have protective rights once Paytm is listed on the bourses. Sharma will be able to appoint one member to its board as long as he owns 2.5 per cent equity, as mentioned in a customary regulatory filing ahead of the payments giant’s initial public offering.

The Paytm CEO already owns more than 9 per cent in Paytm. These rights were included in the shareholding agreement signed between Paytm and Sharma last month, as mentioned in a report in The Economic Times. Sharma also agreed to no longer be classified as Paytm’s ‘promoter group’.

The new agreement has already come into effect. However, shareholders must ratify the proposal to give Sharma the aforementioned protective rights. The proposal would be put up for voting in the first general body meeting after the IPO, the daily stated.

The proposal is unlikely to be contested as all other existing investors including Jack Ma’s Alibaba and affiliates that own more than 30 per cent of the company agree on it.

Along with the 2.5 per cent ownership stake condition, the shareholding agreement also states that Sharma needs to continue his engagement with Paytm in an executive capacity. If Sharma meets both the conditions then he can appoint any person of his choosing to the new board. However, if he fails a condition, he will be able to only nominate himself to the board.

If Sharma fails to meet both the conditions, then he will lose the right to board representation.

Apart from Sharma, Alibaba will get a board seat too. SoftBank Vision Fund and Elevation Capital (formerly SAIF) will be able to nominate a director each.

Moreover, Sharma, along with a group of other investors will also have the ‘rights to first offer’ in case any of the shareholders want to divest their stake in the company.

The digital payments firm expects to launch its IPO at around the end of October, pending regulatory approvals. Paytm, which has filed for Rs 16,600 crore ($2.2 billion) IPO that will likely be the largest ever in India, also reportedly expects to break even in 18 months.

Also read: Paytm to launch IPO by October End; expects to break even in 18 months