One97 Communications Ltd, the operator of the Paytm online payments app, is set to extend Rs 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 30 June, according to notice to Paytm shareholders. The note to the shareholders was sent after Paytm’s board meeting on 28 May.
According to the proposal, Paytm will buy Rs 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 an 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.
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 Holds and VSS investco were incorporated in January 2020 and are engaged in similar businesses. A Paytm is a leader in the payments space. It also provides utility bill payments, recharge, ticketing, hotel booking, and other financial services to consumers.
Paytm has also proposed to pay Sharma a salary of Rs 4 crore a year, even though it has recorded lower revenues and a loss in FY21, which the firm attributed to curbs on business due to the pandemic.
Paytm’s total revenue for FY21 has been recorded at Rs 3, 186.8 crore against Rs 3,540.77 crore, in FY20, as per the company’s latest annual report.
The company’s loss has narrowed to Rs 1,701.01 crore in FY21 from Rs 2,942.36 crore in FY20.
Paytm’s board has approved Sharma’s remuneration of Rs 4 crore for fiscal 2022 and said that this will be the minimum compensation for Sharma regardless of the company’s financial performance, according to the note to shareholders.