Paytm to lend CEO cos ₹743 crore before IPO » - IPS BUSINESS SCHOOL

Paytm to lend CEO cos ₹743 crore before IPO

Paytm to lend CEO cos ₹743 crore before IPO

According to the proposal, Paytm will buy ₹491.93 crore worth of optionally convertible debentures to be sold by VSS Holdings Pvt. Ltd, in which Sharma is a director. VSS is short for Vijay Shekhar Sharma. One97 Communications Ltd, the operator of the Paytm online payments app, is set to extend ₹743 crore funding to two companies owned by founder Vijay Shekhar Sharma ahead of its $3 billion initial share sale planned this year.

The proposal, among others, will be put to vote at the company’s annual meeting on June 30, according to a notice to Paytm shareholders. The note to the shareholders was sent after Paytm’s board meeting on May 28.

According to the proposal, Paytm will buy ₹491.93 crore worth of optionally convertible debentures to be sold by VSS Holdings Pvt. Ltd, in which Sharma is a director. VSS is short for Vijay Shekhar Sharma.

The debentures will mature in 10 years and bear annual interest of 15%. The funding will be done in one or more tranches, according to the note.
Paytm will own 96% in VSS HoldCo on converting the debentures into shares, which can be done at any time.

Paytm said VSS HoldCo will utilize the funds for its primary business activities. According to filings with the registrar of companies, VSS Holdco is involved in activities closely related to financial intermediation, except insurance and pension funding.

Paytm’s other proposal is to loan ₹250.79 crore to VSS Investco Pvt. Ltd through inter-corporate deposits, or ICDs, in one or more tranches. VSS Investco will have to repay the amount within 12 months or before Paytm’s IPO, says the note sent by Paytm to its shareholders. Paytm said Sharma will raise external funding or sell his shares in the company to repay the loan. Paytm said this money, too, will be used for the principal business activities of VSS Investco.

Both VSS Holdco and VSS Investco were incorporated in January 2020 and are engaged in similar businesses.

Paytm’s total revenue for FY21 has been recorded at ₹3,186.8 crore against ₹3,540.77 crore in FY20, as per the company’s latest annual report.

The company’s loss has narrowed to ₹1,701.01 crore in FY21 from ₹2,942.36 crore in FY20.
Foreign investors hold 83.87% in One97 Communications, which is trying to gain market share across financial services offerings.

The company has applied for a new umbrella entity licence as part of a consortium comprising Ola, IndusInd Bank, Zeta, and Suryoday Small Finance Bank. It has also applied for a general insurance licence.

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