With the long-awaited Paytm IPO set to roll soon, hundreds of senior executives at Paytm are converting their employee stock options into shares before the digital payments major brings in one of India's biggest initial public offerings later this year.
According to the company, cumulatively the shares being converted could be worth more than Rs 600 crore. Paytm was last valued at under Rs 12 lakh crore, or $16 billion.
In order to facilitate these transactions, Paytm is also working with leading companies to enable loans of around Rs 100 crore for its top executives. Such financing is expected to help employees deal with the tax payout during the conversion, which will be charged on the difference between the current share price and the price at which the ESOPs were granted.
This initiative will cover around 300 employees, said one person aware of the details. “They (Paytm) were getting many requests from employees about the conversion, and since it's a significant amount, the financing is being arranged through partner lenders,” the person added.
Paytm has not officially commented on the valuation it expects to list at, but people aware of the company's thinking estimate that it could be more than $25 billion.
Meanwhile, Paytm has been issuing ESOPs for over 12 years now and its shares are valued at around Rs 18,000 currently. An employee who received ESOP grants at a price of Rs 1,000 per share, will therefore have to pay tax (based on salary bracket) on the differential of Rs 17,000.
In terms of value, 80% of the ESOP conversions will be led by Paytm's senior employees, sources said. Staff shares are also exempted from any lock-in periods after the IPO. For example, Paytm has the option of raising about Rs 2,000 crore in a pre-IPO round, but investors who put money in this round will not be allowed to sell their shares for a year after the IPO.
Earlier this month, the Noida-based company also sent a letter to shareholders seeking their nod to double its ESOP pool ahead of the much-anticipated IPO. The proposal will be discussed on September 2 during Paytm's extraordinary general meeting (EGM).