Paytm CEO Vijay Shekhar Sharma Surrenders 2.1 Cr ESOPs

Paytm CEO Vijay Shekhar Sharma Surrenders 2.1 Cr ESOPs. Recently, Vijay Shekhar Sharma, the founder, CEO, and Managing Director of Paytm (One 97 Communications), has voluntarily surrendered 2.1 crore unvested Employee Stock Options (ESOPs). This move, announced through a formal stock exchange filing, has raised multiple questions and sparked discussions about regulatory compliance, ethical governance, and the future of Paytm. This article explains the entire situation in detail, from SEBI’s role to the impact on Paytm’s financials and business direction.
What Are ESOPs and Why Are They Important?
Employee Stock Option Plans (ESOPs) are benefits offered to employees, allowing them to purchase shares of the company at a pre-set price, often at a discount. ESOPs are used by companies to attract, retain, and reward talent. They align the employee's interest with the company’s performance, giving them a sense of ownership. However, not everyone in the company is eligible to receive ESOPs under regulatory norms. Especially after a company gets listed on the stock exchange, the rules around ESOP allocation become stricter — particularly when it comes to promoters or those holding significant control in the company.
Vijay Shekhar Sharma Surrenders 2.1 Cr ESOPs – Big Announcement
On April 16, 2025, Paytm’s parent company One 97 Communications informed the stock exchanges that Vijay Shekhar Sharma had voluntarily given up 2.1 crore unvested ESOPs that were granted to him under the company’s 2019 ESOP scheme. According to the official exchange filing, “Mr. Vijay Shekhar Sharma… vide letter dated April 16, 2025 has informed the company that he has voluntarily forgone all 2,10,00,000 (Two Crore Ten Lakhs) ESOPs granted to him under One 97 Employees Stock Option Scheme, 2019, with immediate effect.” Following this decision, the 2.1 crore ESOPs have been cancelled and returned to the company’s ESOP pool.
Why Were the ESOPs Controversial?
The ESOPs in question came under scrutiny from the Securities and Exchange Board of India (SEBI), India’s capital markets regulator. SEBI had raised concerns regarding the grant of these stock options during FY 2021-22, pointing out potential violations in classification and eligibility. Under SEBI rules, promoters or individuals holding significant influence over a listed company are not permitted to receive ESOPs. This restriction is put in place to prevent misuse of insider information and ensure fair distribution of company shares among deserving employees. Vijay Shekhar Sharma, although officially listed as an employee during Paytm’s IPO filing in 2021, was the founder and had a large stake in the company. SEBI questioned this classification and argued that Sharma should have been treated as a promoter, not merely an employee.
SEBI’s Show-Cause Notice and IPO Misclassification - Background
In the March quarter of 2024, SEBI issued a show-cause notice to Paytm concerning the grant of the 2.1 crore ESOPs. The matter stemmed from events around Paytm’s IPO in 2021. At that time, Sharma owned around 14.7% of the company. In an apparent attempt to reduce his direct stake below the 10% threshold — possibly to avoid being classified as a promoter — he transferred 30.97 million shares to Axis Trustee Services, which held the shares on behalf of his family trust. This transfer brought his direct stake down to 9.1%. As a result, Sharma was listed as an employee in the IPO documents, not as a promoter.
However, SEBI believed that the move was an intentional strategy to circumvent the rules and that Sharma should still be treated as a promoter due to the level of control he continued to hold. According to SEBI, this made him ineligible for ESOPs, especially after the company went public.
SEBI Regulations on ESOPs Post-IPO
SEBI’s regulations are clear when it comes to stock options for promoters of listed companies. Once a company is listed on the stock exchange, promoters or those classified as having control cannot be granted ESOPs. The objective is to keep the ownership structure transparent and to protect retail investors.
In Paytm’s case, SEBI’s scrutiny revolved around two key issues:

Promoter Classification: Whether Sharma was genuinely not a promoter at the time of ESOP allocation.

Eligibility: Whether Sharma was eligible to receive ESOPs as per the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations.

As Sharma continued to wield significant influence, SEBI argued that his actions around the IPO were in violation of these regulations.
Impact of Surrendering the ESOPs on Paytm
Following Sharma’s decision to give up the 2.1 crore ESOPs, Paytm announced that this move would result in a one-time, non-cash expense of INR 492 crore in Q4 FY25. This is because the accounting standards require the company to immediately recognize the ESOP cost that would have been spread over multiple years. The company stated in its filing, “This will result in a one-time, non-cash, acceleration of ESOP expense of INR 492 Cr in Q4 FY 2025, and an equivalent lowering of ESOP expenses in future years.” Although this looks like a big expense in one quarter, it will reduce Paytm’s ESOP-related costs going forward, leading to cleaner balance sheets in the coming years.
SEBI and RBI’s Joint Watch
The show-cause notice from SEBI was reportedly based on insights received from the Reserve Bank of India (RBI). RBI had been closely monitoring Paytm Payments Bank and its transactions, and these investigations eventually led to broader scrutiny, including into how ESOPs were granted to Sharma. The overlap of investigations from both RBI and SEBI created a serious compliance challenge for the company, especially in a year when the business had already been hit by regulatory actions. In early 2024, RBI had clamped down on Paytm Payments Bank, which caused major operational hurdles for the company.
Past SEBI Settlements by Paytm Officials
In January 2025, eight former and current Paytm directors and executives settled a case with SEBI by paying a combined amount of INR 3.32 crore. These officials were accused of not exercising proper diligence and independence while approving the ESOP grant to Sharma and his close relatives. This settlement indicated that the matter was serious and that multiple stakeholders had potentially failed to uphold governance standards expected from a listed entity.
Paytm’s Efforts to Recover from the Regulatory Blow
Over the past year, Paytm has been taking corrective actions in the face of regulatory pressure. The company has Reduced its employee count, Sold off non-core businesses like Paytm Insider, Shifted focus to core revenue-generating areas such as digital payments, merchant services, and lending. These measures are part of a broader strategy to become leaner, more compliant, and focused on profitability.
Financial Performance Amid Crisis
Despite facing regulatory heat and operational restrictions, Paytm’s financials in recent quarters have shown a mixed picture. In Q3 FY25, the company reported A net loss of INR 208.5 crore, a 6% improvement from INR 221.7 crore in Q3 FY24, A 36% drop in revenue year-on-year, down to INR 1,827 crore While the revenue decline is significant, the narrowing of losses indicates an effort to cut costs and aim for profitability. CEO Sharma also mentioned in February that he expects the company to be profitable in Q1 FY26.
Paytm’s UPI Market Share Drops
One area of concern for Paytm is its falling share in the UPI (Unified Payments Interface) segment. The company’s UPI market share dropped from around 10% to just under 7% in the past year. This is a critical loss given that UPI forms a significant portion of Paytm’s transaction volume. However, the sale of non-core businesses and the shift to focus on high-margin verticals like insurance and wealth management could help Paytm strengthen its bottom line in the long run.
Public and Market Response to the ESOP Surrender
On the day of the announcement, Paytm’s stock price closed 2.97% higher at INR 864.50 on the Bombay Stock Exchange (BSE). This indicates that the market viewed the move positively. Investors may have interpreted Sharma’s decision as a step toward improved corporate governance and regulatory compliance. By giving up the ESOPs voluntarily, Sharma may have helped the company avoid further penalties, preserved investor confidence, and signaled a willingness to put the company’s long-term stability above personal gain.
What Lies Ahead for Paytm?
The path forward for Paytm involves rebuilding trust with regulators, shareholders, and customers. The company needs to maintain transparency in its governance, strictly follow regulatory frameworks, and continue its push toward profitability. Vijay Shekhar Sharma remains a central figure in this journey. His actions will continue to shape how Paytm is viewed in the public and regulatory eyes. While the ESOP surrender is a positive step, future decisions will need to be equally aligned with ethical and legal standards.
Conclusion
The surrender of 2.1 crore ESOPs by Paytm CEO Vijay Shekhar Sharma is a reminder for big companies to stay ahead on regulatory compliance. To avoid similar scrutiny, companies must correctly classify promoters, follow SEBI’s ESOP rules, involve independent directors in key approvals, and maintain clear, timely disclosures. Proper ESOP pool management, avoiding conflict of interest, and coordinating with regulators like SEBI and RBI are Important. This is where Compliance Calendar LLP steps in—offering expert assistance in ESOP structuring, IPO governance, and regulatory compliance, helping businesses stay audit-ready, investor-confident, and legally sound in a rapidly evolving compliance environment.
You can connect with experts through email info@ccoffice.in or Call/Whatsapp at +91 9988424211.

Recently, Vijay Shekhar Sharma, the founder, CEO, and Managing Director of Paytm (One 97 Communications), has voluntarily surrendered 2.1 crore unvested Employee Stock Options (ESOPs). This move, announced through a formal stock exchange filing, has raised multiple questions and sparked discussions about regulatory compliance, ethical governance, and the future of Paytm. This article explains the entire situation in detail, from SEBI’s role to the impact on Paytm’s financials and business direction.

What Are ESOPs and Why Are They Important?

Employee Stock Option Plans (ESOPs) are benefits offered to employees, allowing them to purchase shares of the company at a pre-set price, often at a discount. ESOPs are used by companies to attract, retain, and reward talent. They align the employee's interest with the company’s performance, giving them a sense of ownership. However, not everyone in the company is eligible to receive ESOPs under regulatory norms. Especially after a company gets listed on the stock exchange, the rules around ESOP allocation become stricter — particularly when it comes to promoters or those holding significant control in the company.

Vijay Shekhar Sharma Surrenders 2.1 Cr ESOPs – Big Announcement

On April 16, 2025, Paytm’s parent company One 97 Communications informed the stock exchanges that Vijay Shekhar Sharma had voluntarily given up 2.1 crore unvested ESOPs that were granted to him under the company’s 2019 ESOP scheme. According to the official exchange filing, “Mr. Vijay Shekhar Sharma… vide letter dated April 16, 2025 has informed the company that he has voluntarily forgone all 2,10,00,000 (Two Crore Ten Lakhs) ESOPs granted to him under One 97 Employees Stock Option Scheme, 2019, with immediate effect.” Following this decision, the 2.1 crore ESOPs have been cancelled and returned to the company’s ESOP pool.

Why Were the ESOPs Controversial?

The ESOPs in question came under scrutiny from the Securities and Exchange Board of India (SEBI), India’s capital markets regulator. SEBI had raised concerns regarding the grant of these stock options during FY 2021-22, pointing out potential violations in classification and eligibility. Under SEBI rules, promoters or individuals holding significant influence over a listed company are not permitted to receive ESOPs. This restriction is put in place to prevent misuse of insider information and ensure fair distribution of company shares among deserving employees. Vijay Shekhar Sharma, although officially listed as an employee during Paytm’s IPO filing in 2021, was the founder and had a large stake in the company. SEBI questioned this classification and argued that Sharma should have been treated as a promoter, not merely an employee.

SEBI’s Show-Cause Notice and IPO Misclassification - Background

In the March quarter of 2024, SEBI issued a show-cause notice to Paytm concerning the grant of the 2.1 crore ESOPs. The matter stemmed from events around Paytm’s IPO in 2021. At that time, Sharma owned around 14.7% of the company. In an apparent attempt to reduce his direct stake below the 10% threshold — possibly to avoid being classified as a promoter — he transferred 30.97 million shares to Axis Trustee Services, which held the shares on behalf of his family trust. This transfer brought his direct stake down to 9.1%. As a result, Sharma was listed as an employee in the IPO documents, not as a promoter.

However, SEBI believed that the move was an intentional strategy to circumvent the rules and that Sharma should still be treated as a promoter due to the level of control he continued to hold. According to SEBI, this made him ineligible for ESOPs, especially after the company went public.

SEBI Regulations on ESOPs Post-IPO

SEBI’s regulations are clear when it comes to stock options for promoters of listed companies. Once a company is listed on the stock exchange, promoters or those classified as having control cannot be granted ESOPs. The objective is to keep the ownership structure transparent and to protect retail investors.

In Paytm’s case, SEBI’s scrutiny revolved around two key issues:

Promoter Classification: Whether Sharma was genuinely not a promoter at the time of ESOP allocation.
Eligibility: Whether Sharma was eligible to receive ESOPs as per the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations.

As Sharma continued to wield significant influence, SEBI argued that his actions around the IPO were in violation of these regulations.

Impact of Surrendering the ESOPs on Paytm

Following Sharma’s decision to give up the 2.1 crore ESOPs, Paytm announced that this move would result in a one-time, non-cash expense of INR 492 crore in Q4 FY25. This is because the accounting standards require the company to immediately recognize the ESOP cost that would have been spread over multiple years. The company stated in its filing, “This will result in a one-time, non-cash, acceleration of ESOP expense of INR 492 Cr in Q4 FY 2025, and an equivalent lowering of ESOP expenses in future years.” Although this looks like a big expense in one quarter, it will reduce Paytm’s ESOP-related costs going forward, leading to cleaner balance sheets in the coming years.

SEBI and RBI’s Joint Watch

The show-cause notice from SEBI was reportedly based on insights received from the Reserve Bank of India (RBI). RBI had been closely monitoring Paytm Payments Bank and its transactions, and these investigations eventually led to broader scrutiny, including into how ESOPs were granted to Sharma. The overlap of investigations from both RBI and SEBI created a serious compliance challenge for the company, especially in a year when the business had already been hit by regulatory actions. In early 2024, RBI had clamped down on Paytm Payments Bank, which caused major operational hurdles for the company.

Past SEBI Settlements by Paytm Officials

In January 2025, eight former and current Paytm directors and executives settled a case with SEBI by paying a combined amount of INR 3.32 crore. These officials were accused of not exercising proper diligence and independence while approving the ESOP grant to Sharma and his close relatives. This settlement indicated that the matter was serious and that multiple stakeholders had potentially failed to uphold governance standards expected from a listed entity.

Paytm’s Efforts to Recover from the Regulatory Blow

Over the past year, Paytm has been taking corrective actions in the face of regulatory pressure. The company has Reduced its employee count, Sold off non-core businesses like Paytm Insider, Shifted focus to core revenue-generating areas such as digital payments, merchant services, and lending. These measures are part of a broader strategy to become leaner, more compliant, and focused on profitability.

Financial Performance Amid Crisis

Despite facing regulatory heat and operational restrictions, Paytm’s financials in recent quarters have shown a mixed picture. In Q3 FY25, the company reported A net loss of INR 208.5 crore, a 6% improvement from INR 221.7 crore in Q3 FY24, A 36% drop in revenue year-on-year, down to INR 1,827 crore While the revenue decline is significant, the narrowing of losses indicates an effort to cut costs and aim for profitability. CEO Sharma also mentioned in February that he expects the company to be profitable in Q1 FY26.

Paytm’s UPI Market Share Drops

One area of concern for Paytm is its falling share in the UPI (Unified Payments Interface) segment. The company’s UPI market share dropped from around 10% to just under 7% in the past year. This is a critical loss given that UPI forms a significant portion of Paytm’s transaction volume. However, the sale of non-core businesses and the shift to focus on high-margin verticals like insurance and wealth management could help Paytm strengthen its bottom line in the long run.

Public and Market Response to the ESOP Surrender

On the day of the announcement, Paytm’s stock price closed 2.97% higher at INR 864.50 on the Bombay Stock Exchange (BSE). This indicates that the market viewed the move positively. Investors may have interpreted Sharma’s decision as a step toward improved corporate governance and regulatory compliance. By giving up the ESOPs voluntarily, Sharma may have helped the company avoid further penalties, preserved investor confidence, and signaled a willingness to put the company’s long-term stability above personal gain.

What Lies Ahead for Paytm?

The path forward for Paytm involves rebuilding trust with regulators, shareholders, and customers. The company needs to maintain transparency in its governance, strictly follow regulatory frameworks, and continue its push toward profitability. Vijay Shekhar Sharma remains a central figure in this journey. His actions will continue to shape how Paytm is viewed in the public and regulatory eyes. While the ESOP surrender is a positive step, future decisions will need to be equally aligned with ethical and legal standards.

Conclusion

The surrender of 2.1 crore ESOPs by Paytm CEO Vijay Shekhar Sharma is a reminder for big companies to stay ahead on regulatory compliance. To avoid similar scrutiny, companies must correctly classify promoters, follow SEBI’s ESOP rules, involve independent directors in key approvals, and maintain clear, timely disclosures. Proper ESOP pool management, avoiding conflict of interest, and coordinating with regulators like SEBI and RBI are Important. This is where Compliance Calendar LLP steps in—offering expert assistance in ESOP structuring, IPO governance, and regulatory compliance, helping businesses stay audit-ready, investor-confident, and legally sound in a rapidly evolving compliance environment.

You can connect with experts through email info@ccoffice.in or Call/Whatsapp at +91 9988424211.