Paytm cue: Adhere to stock option rules in both letter and spirit

livemint.com:

The shares of Paytm’s owner One97 Communications tumbled by almost 10% in intraday trading on Monday. The company rushed to clarify that it wasn’t under fresh regulatory scrutiny, but the payments platform had only the dismal optics of its own past actions to blame for taut nerves among investors. Although One97 has denied having received a new show-cause notice from the Securities and Exchange Board of India (Sebi), its 2021 issuance of employee stock options to founder-CEO Vijay Shekhar Sharma continues to haunt it, evidently.

The business, which went public almost three years ago, is trying to settle the case through a mechanism that lets a listed firm pay a penalty or face a market ban, depending on the gravity of the alleged violation, in lieu of the matter being closed without it having to accept or deny the charges. Even if this effort fructifies, the cloud this episode has cast on its image is unlikely to lift. One97 is accused of having violated a Sebi rule for Employee Stock Ownership Plans (ESOPs) that bars promoters from being awarded stock options.

Under this norm, a shareholder with over a tenth of a listed company’s equity pie cannot claim non-promoter status and is not entitled to an ESOP award. As reported, Sharma had owned around 9% of the firm’s equity, a figure on which the award’s defence appears to rest, primarily. But then, that was just his directly owned stake.

Notably, levels of ownership and control are not always the same. Sharma has additional shares owned indirectly via a family trust that would take his interest above the Sebi cutoff. Plus, Sharma last year struck a complex offshore deal with Antfin Holding BV that reportedly gave him an added 10.3% of One97’s voting rights and effectively