Institutional Investor Advisory Services India (IiAS), a proxy advisory firm, has advised shareholders of One 97 Communications to vote against five resolutions of the firm, including reappointment of Vijay Shekhar Sharma as managing director.
The advisory comes ahead of the company’s annual general meeting convened for August 19. Sharma is the founder, chairperson, managing director and chief executive officer of the company. The Noida-headquartered company is the parent entity of mobile payments and financial services firm Paytm.
“Since the company’s listing, its stock price has fallen by 63.6% (from the issue price of Rs 2,150), resulting in wealth destruction for shareholders. In FY22, the company reported a cash loss of Rs 1,200 crore and losses in the first quarter of FY23 were high. Sharma has made several commitments in the past to make the company profitable, however, these have not played out. We believe the board must consider professionalising the management,” IiAS said.
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“We take comfort in the board’s assertion that the company has an effective mechanism for succession planning for the orderly succession of directors and senior management personnel. We raise concerns that he is not liable to retire by rotation, and that he will get ‘board permanency’ if he continues in a non-executive capacity following the end of his term as managing director.”
In its motion, One 97 Communications had sought to reappoint Sharma as managing director designated as managing director and CEO for five years from December 19, 2022.
IiAs also asked shareholders to vote against approval of Sharma’s remuneration, as his overall remuneration is higher than the remuneration levels of all S&P BSE Sensex companies’ CEOs, most of which are profitable.
IiAS estimates that Sharma’s remuneration for FY23 is Rs 796.28 crore, which comprises 21 million stock options at an exercise price of Rs 9. This is a “deep discount” to the market price on the date of grant. He was granted 46.5% of the entire stock option pool, which is equal to 3.2% of the outstanding share capital.
“…the proposed remuneration as minimum remuneration will be paid to him even if the company continues to report losses,” it said, adding there were no disclosures regarding the vesting conditions relating to the stock option grants and thus, no alignment with the interest of shareholders.
It also asked shareholders to vote against the reappointment of Ravi Chandra Adusumalli as director. Adusumalli is a managing partner of Elevation Capital and a nominee director of SAIF and Elevation Capital on the company’s board.
“He has attended 47% board meetings in FY22. We expect directors to take their responsibilities seriously and attend all board meetings, and at the very least 75% board meetings,” it said.
Further, it also wanted shareholders to vote against the remuneration to Madhur Deora as a whole-time director designated as executive director, president and group chief financial officer for three years from FY23.
“There is no clarity or cap regarding future stock option grants. The company is seeking shareholder approval for the proposed remuneration as minimum remuneration — which will be paid to him even if the company continues to report losses,” it said. A motion for contribution to charitable trusts and other funds up to Rs 10 crore per annum was also asked to be turned down.