Paytm, Vijay Shekhar Sharma Settle ESOP Case With SEBI

Fintech major Paytm has settled ESOP-related case with markets regulator SEBI by paying a penalty of INR 1.1 Cr to the regulator as well as cancelling the 2.1 Cr stock options granted to its founder, CEO and MD Vijay Shekhar Sharma and 2.2 Lakh ESOPs granted to his brother and CBO-marketing cloud business Ajay Shekhar Sharma. 

The founder and CEO has been prohibited from accepting any fresh ESOPs from the listed company for a period of three years. Besides, he coughed up INR 1.1 Cr to the regulator as settlement amount. 

Similarly, his brother Ajay settled the case for INR 57.1 Lakh, along with a “disgorgement” of INR 35.9 Lakh, an amount he made by selling 3,720 shares he obtained upon exercise of the ESOPs.

SEBI had sent showcause notice to Paytm parent One97 Communications and the brothers (Vijay and Ajay) in February 2024. After agreeing to the settlement terms, SEBI sent the demand notice to the aforementioned parties on March 21, 2025.

What’s The Case About?

In its showcause notice, the markets regulator levelled the following charges: 

While Paytm’s IPO papers filed on July 12, 2021, showed Vijay as a non-promoter, he was the promoter of the company as per its annual returns for FY21. There was no material change in his rights or influence over the management.

Sharma created an arrangement of transfer of a portion of his equity in Paytm parent to a family-trust controlled by him so that he could continue to exercise control over more than 10% equity of the company directly and indirectly. This allowed him to “arbitrarily” allot a large pool of ESOPs to himself to the detriment of public shareholders.

SEBI alleged that ESOPs were granted to Ajay as Vijay was in a position to influence the  decision making of the company’s Nomination and Remuneration Committee.

One97 Communications and Vijay were alleged to have made “incorrect” disclosures in the company’s offer documents by mentioning the latter as a non-promoter public shareholder. 

Vijay was also alleged to not have provided the necessary disclosures required to be given by the promoter of a company including promoters’ contribution and lock-in period, profile of the promoter and declarations to be submitted to the stock exchanges, details of payment to him from the company, among others. 

With this, Paytm’s stand-off with the regulator has come to an end. After receiving the notice from SEBI, Paytm filed three replies to the regulator between August and November 2024. 

“SEBI shall not initiate any other enforcement action against the Applicants (Paytm and the Sharma brothers) for the violations as alleged in the SCN (show cause notice),” the markets regulator said in its order dated May 8. 

It is pertinent to mention that Paytm, last month, said that its founder, CEO and MD voluntarily gave up 2.1 Cr unvested ESOPs. However, this hit the company’s bottom line in Q4, as it had to bear a non-cash accelerated charge of INR 492.4 Cr during the quarter because of this.

Paytm posted a net loss of INR 544.6 Cr because of exceptional items in Q4. Without the exceptional charges, it would have posted a net loss of just INR 23 Cr. Meanwhile, operating revenue dipped 19% YoY to INR 1,911.5 Cr from INR 2,267.1 Cr in Q4 FY24.

Now, the company is looking to turn profitable in Q1 FY26. In its post-earnings call, Vijay gave multiple business updates, including Paytm moving back to its digital payments-first business model, a potential return of its wallet business, increased focus on global expansion, and focus on merchant loans business rather than personal loans. 

Shares of the company ended today’s trading session 4.53% lower than the previous close at INR 834.30 on the BSE.