Paytm to help employees exercise ESOPs ahead of IPO

Paytm will help its employees exercise their stock options ahead of the upcoming initial public offering (IPO). Parent company One97 Communications is reportedly in talks with a few lenders to let its staff borrow money to exercise their employee stock options (ESOPs) as well as make tax payments if required.

The payments company might facilitate a loan size of Rs 100 crore. It is likely to help around 300-500 employees who have vested options. According to a report in Livemint, the loans will be issued for a period of one year.

If the employee fails to pay back, the lenders would allow the individual to sell a portion of their shares to pay the loan. And if the IPO is delayed, then the employees can sell their shares in the grey market to pay back the loan.

ESOPs grant company shares to its employees, often based on the duration of their employment. Shares vest over a period of time. ESOPs are granted to employees to align their motivations with the company shareholders. They also have tax advantages.

Paytm is in talks with institutions such as ICICI Bank and Edelweiss Capital to help its employees convert their stock ownership options to shares. "The One97 management is also in talks to absorb the interest costs of the loans being provided to employees. The final names of the lenders and total credit size is expected to be decided this week," said a person in the know to the daily.

The company is heading for a $2.2-billion IPO, the biggest offer in the Indian stock market history.

Paytm told its shareholders that it is looking to alter the One97 Employee Stock Option Scheme 2019 to double its existing ESOP pool from 24.1 million equity options to 61.1 million at a face value of Re 1 each.

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