Vijay Shekhar Sharma, Brother Settle with SEBI; No ESOPs from Listed Companies for 3 Years

The Securities and Exchange Board of India (SEBI) on Thursday settled a 2024 case related to the issue of employee stock ownership plans (ESOPs) with Paytm’s parent firm, One97 Communications Ltd., along with its CEO Vijay Shekhar Sharma and his brother Ajay Shekhar Sharma.

The case pertains to the allotment of ESOPs to the Sharma brothers before the company was listed on the stock exchange in 2021. According to SEBI regulations, promoters are not allowed to receive ESOPs. The regulator also raised concerns regarding Sharma’s classification as a public shareholder.

One97 Communications had granted 2.1 crore ESOPs to Vijay Shekhar Sharma in October 2021 and 2,26,582 ESOPs to his brother Ajay Shekhar Sharma in May 2022.

Under the terms of the settlement, SEBI stated that Vijay Shekhar Sharma has agreed not to accept any new ESOPs from any listed company for a period of three years. He has also paid Rs 1.11 crore as part of the settlement. Additionally, ESOPs worth Rs 2.10 crore previously granted to him have been cancelled. SEBI clarified that no further enforcement action will be taken against the parties involved.

Ajay Shekhar Sharma, who serves as the company’s Chief Business Officer, has also had ESOPs worth Rs 2.22 crore annulled. He agreed to settle the matter by paying over Rs 57 lakh.

Last month, Vijay Shekhar Sharma voluntarily surrendered his entire allocation of 2.1 crore ESOP units. One97 Communications informed the stock exchanges that he had submitted a formal request to waive these rights with immediate effect. The company’s Nomination and Remuneration Committee approved the request in a board meeting held the same day.

This move will result in a one-time, non-cash accounting impact of Rs 492 crore related to ESOP expenses for the quarter ending March 31, 2025. The company expects a corresponding reduction in ESOP-related costs in future financial periods.

How the ESOP Controversy Began

The issue was first flagged in January 2023 by proxy advisory firm Institutional Investor Advisory Services India Ltd., which questioned whether regulatory norms had been bypassed. In response, Paytm stated in an August 2024 filing that it believed it had complied with all applicable regulations, citing independent legal advice in support of its position.

SEBI later raised concerns with One97 and issued a show-cause notice over the ESOP allotment made to Sharma before the company’s IPO.

“Vijay Shekhar Sharma had special rights by virtue of his position as founder and Managing Director of OCL. Hence, it is alleged that he was in a position to influence the decision-making of the Nomination and Remuneration Committee (NRC) while approving the grant of ESOPs to himself and his brother, Ajay Shekhar Sharma,” SEBI said.

It further alleged that the ESOPs granted to Ajay Shekhar Sharma were influenced by Vijay Shekhar Sharma, particularly since just 10 months earlier, Ajay’s ESOPs had been cancelled on the grounds that the Companies Act prohibits ESOP issuance to promoter groups, and SEBI’s definition of promoter group includes family members.

As of March 2025, Vijay Shekhar Sharma holds a 9.1% direct stake in One97 Communications. He also owns a 4.87% stake through a trust managed by Axis Trustee and controls a 10.27% stake via Resilient Asset Management BV, under an agreement with Antfin (Netherlands) Holding BV. In total, this brings his direct and indirect ownership in the company to 24.24%.

The ESOP dispute adds to a series of regulatory challenges for Paytm. In January 2024, the Reserve Bank of India took enforcement action against Paytm Payments Bank over compliance issues, significantly impacting the company’s wallet and banking services and leading to a sharp fall in its stock value.