Paytm Founder Buys 1.7 Million Shares in the Company He Founded

According to an article in India’s Economic Times dated 17 June 2022, the founder of Paytm bought shares in his own company worth eleven million rupees. To grasp this action and its implications, the background of the company and its owner need to be considered. This is done below.

Background

Paytm is a financial service and digital payments institution in India. Its parent company One97 Communications was established in 2000 and Paytm followed in 2010. In both instances, the founder was Vijay Shekhar Sharma. One97 Communications deals with fintech and e-commerce. The acronym Paytm stands for ‘pay through mobile’. This company was opened with a two-million-dollar investment from Sharma. It had 10.4 million users in 2015.

Paytm offers numerous services. For Indians who work abroad, many send money to their families with Paytm mobile wallets back home in India through an international money transfer app. It chiefly operates a mobile payment service that can be transacted through the receiving business’s QR code or POS (point of sale). Other service offerings are buy-now-pay-later, ticketing, and microloans. Finally, it sells online games and retail brokerage goods.

Why Sharma Bought Shares in His Own Company

Sharma’s shares in Paytm were bought at the end of May 2021, using the employees’ stock option. He stated in April that these shares would only be assigned to him once the share price remained stable above the Initial Public Offering (IPO) price when they were made available for purchase by the general public. This meant that Sharma invested an amount of eleven million rupees into Paytm to give it a boost.

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What Was the Outcome?

Unfortunately, Sharma’s shares crashed on The Bourse, India’s stock market exchange, in November 2021. With an IPO price of 2,150 rupees per share, Paytm shares are trading at 70% below this issue price at 629.10 rupees. Sharma had paid approximately 647 rupees per share in May 2021. Thus, the shares could not be vested to him yet.

What Is the Outlook?

Sharma, as both Chief Executive Officer (CEO) and Managing Director (MD) of Paytm, anticipates that the company will reach a breakeven point in September 2022. Paytm reported healthy growth in the loan dispersal side of the business of 471% from April to May this year. During the latter month, Sharma indicated that they planned to obtain a general insurance license and invest 950 million rupees in their insurance division in portions (known as tranches) over a ten-year period.

The Current Status Quo

Sharma’s share in Paytm is 8.9%. The biggest shareholder is the Ant Group with 24.9% of the shares followed by the SoftBank Vision fund with 17.47%. Sharma was a billionaire, but his net worth decreased to 9,999 million in April 2022. It was worth 2,35 billion dollars just before the IPO of Paytm. Paytm has lost eighty-six million rupees a day from the day it opened trading on The Bourse. 

Nevertheless, Sharma is viewed as an inspirational leader by his employees.