Paytm staff eye Rs 600-crore ESOP share conversion ahead of IPO

Bengaluru: A whole bunch of senior executives at Paytm are changing their worker inventory choices into shares earlier than the digital funds main
launches considered one of India’s largest preliminary public choices later this yr.

Cumulatively, the shares being transformed could possibly be price greater than Rs 600 crore, individuals conscious of the matter informed ET, primarily based on the Noida-based firm’s most up-to-date valuation.

Paytm was final valued at below Rs 12 lakh crore, or $16 billion.

To be able to facilitate these transactions, Paytm can also be working with lending corporations to allow loans of round Rs 100 crore for its high executives, the sources mentioned. Such financing is anticipated to assist staff take care of the tax payout throughout the conversion, which shall be charged on the distinction between the present share worth and the worth at which the ESOPs have been granted.

This initiative will cowl round 300 staff, mentioned one particular person conscious of the main points.

“They (Paytm) have been getting many requests from staff in regards to the conversion, and because it’s a big quantity, the financing is being organized by associate lenders,” the particular person added.

These strikes come shut on the heels of
Zomato’s stellar listing final month that
spawned about 18 dollar-millionaires amongst its senior management, ET reported on July 24.

Paytm has not formally commented on the valuation it expects to record at, however individuals conscious of the corporate’s considering estimate that it could possibly be greater than $25 billion.

A spokesperson for Paytm declined to touch upon the most recent developments.

Upbeat Staffers

Paytm has been issuing ESOPs for over 12 years now and its shares are valued at round Rs 18,000 at the moment. An worker who obtained ESOP grants at a worth of Rs 1,000 per share, will due to this fact must pay tax (primarily based on wage bracket) on the differential of Rs 17,000.

When it comes to worth, 80% of the ESOP conversions shall be led by Paytm’s senior staff, sources mentioned.

Workers shares are additionally exempted from any lock-in intervals after the IPO. For instance, Paytm has the choice of elevating about Rs 2,000 crore in a pre-IPO spherical, however traders who put cash on this spherical is not going to be allowed to promote their shares for a yr after the IPO.

“I do know individuals who have taken loans to do that earlier than and bought the shares when a window was obtainable,” mentioned a former high government at Paytm. “There’s clearly lots of pleasure about Paytm’s IPO, and when such conversion is being deliberate in bulk, financing shall be simpler by banks or NBFCs,” mentioned this particular person, who had bought Paytm ESOPs throughout buybacks carried out by the funds main.

Paytm will bear the curiosity fee for the loans being organized, sources added. The employees is anticipated to pay this again inside six months of itemizing.

“That’s customary for loans in opposition to securities,” one of many sources added.

Earlier this month, the Noida-based firm additionally despatched a letter to shareholders searching for their nod
to double its ESOP pool forward of the much-anticipated IPO. The proposal shall be mentioned on September 2 throughout Paytm’s extraordinary basic assembly (EGM).

Retention Software

ESOPs have at all times been used as a instrument to draw and retain expertise in new-age corporations. During the last 12-18 months, demand for ESOPs has risen as startups have seen valuations surge with
record levels of capital being pumped into the startup economic system.

Firms like
PhonePe,
Udaan,
Razorpay,
Cred,
Acko,
Zerodha and
Ola are amongst these to have granted inventory choices by ESOP schemes. The thought is these shares could be bought at a better worth on the time of an IPO or share buyback throughout an organization fundraise.

Final month, ET reported {that a} host of startups have accomplished employees share buybacks price virtually $546 million cumulatively.

Additionally Learn:
Startups have an ESOPs fable to tell

Founders usually say that is a part of the “wealth creation” alternative that comes from working for a startup the place everybody will get to make cash and never simply the founders.

A number of extremely valued startups and new unicorns this yr are planning to conduct related buybacks over the approaching months as nicely, sources have informed ET.

In July, SoftBank- and Alibaba-backed Paytm
had filed its draft pink herring prospectus with the markets regulator, the Securities and Change Board of India (Sebi), to lift Rs 16,600 crore ($2.2 billion) by a public subject in what can be one of many largest Indian IPOs in not less than a decade.