SUMMARY
Paytm spent INR 564 Cr in lieu of ESOP expenses towards directors, key management personnel (KMPs) and relatives of the KMPs
Zomato spent INR 380 Cr on ESOP expenses, salaries and other employee benefits for its CEO, CFO and company secretary
This comes even as Zomato reported a consolidated loss of INR 250.8 Cr in Q2 FY23 while Paytm’s net loss soared to INR 571 Cr during the same period
Even as shares of Zomato and Paytm continue to be in free fall, the top executives of these new age tech tech companies took home crores in employee stock options in the first half of the financial year 2022-23 (FY23).
According to related-party disclosures made by Paytm, the fintech major spent INR 564 Cr in lieu of employee stock option (ESOP) expenses towards directors, key management personnel (KMPs) and relatives of the KMPs.
This is in addition to another INR 5.22 Cr in expenses accrued towards the salaries, bonuses and incentives of directors, KMPs and their relatives.
The fintech major had seen its ESOP expenses on account of KMPs, including CEO and managing director Vijay Shekhar Sharma and CFO Madhur Deora, grow 50X to INR 567 Cr in FY22.
A query sent to Paytm spokesperson elicited no reply. This story will be updated with their response, as and when it is received.
On the other hand, Zomato also spent INR 380 Cr on ESOP expenses, salaries and other employee benefits for its three KMPs namely chief executive officer (CEO) Deepinder Goyal, chief financial officer (CFO) Akshant Goyal and company secretary Sandhya Sethia in H1 FY23.
In the financial disclosures, Zomato also noted that both Deepinder and Akshant Goyal waived off their salary for the first half of the current fiscal year.
In a written reply sent to Inc42, Zomato said, “These are expected accounting charges for FY2023 for the ESOPs granted. Majority of this pertains to the ESOPs granted to our CEO and MD prior to the IPO and disclosed previously.”
Interestingly, Inc42 had previously reported that Zomato had spent INR 386.9 Cr on stock options for Deepinder Goyal in the second half of FY22. It had also incurred an expense of INR 77.8 Cr for three KMPs on account of ESOPs as well as salary and other benefits during the same period.
A Tale Of Two Perspectives
These listed companies have been under the scanner of the critics owing to heavy ESOP benefits granted to the top leadership despite a tumultuous year at the bourses.
Earlier this year, it was widely reported that foreign institutional investors were raising objections to the liberal stock option issuances at new age tech companies saying that these are happening at deep discounts to the current market prices.
There has also been criticism that the top executives have been owning a large chunk of these ESOPs even as these players continue to grapple with mounting losses and no clear path to profitability.
Foodtech giant Zomato had seen its consolidated losses narrow to INR 250.8 Cr in the second quarter of FY23, down from INR 434.9 Cr during the corresponding period last fiscal year.
Paytm, however, saw its net loss widened 21% year-on-year (YoY) to INR 571 Cr in Q2 FY23.
Apart from mourning losses, the two players have also faced investor ire over the course of the year. Zomato shares have plunged nearly 60% from its record high in November last year.
On similar lines, Paytm stock has tanked 75% since IPO, the world’s biggest single-year tumble in share prices among large IPOs in the past decade.
Both Paytm and Zomato have seen their stock prices fall to record lows in the first half of FY23, and the situation has only worsened from thereafter.
Institutional investors have also been leaving the two companies in droves on the expiration of the lock-in period for pre-IPO anchor investors. While SoftBank recently offloaded 4.5% stake in Paytm, Zomato has seen the exodus of many giants such as Uber, Sequoia Capital, Moore and Tiger Global.
With market volatility only expected to intensify going forward and inflation expected to dampen revenues, it remains to be seen how these startups turn their fortunes. For the time being, these dole-outs are likely to weigh heavily on the coffers of Paytm and Zomato.
