PaytmUS$2.2 billion IPO is facing an unusual hurdle – a 71-year-old former director has urged India’s markets regulator to halt the offering, alleging he is a co-founder who sold 27,500 dollars two decades ago. Had invested dollars but never got shares.
In legal documents seen by Reuters, Paytm says Ashok Kumar Saxena’s claim and allegations of fraud in a police complaint in New Delhi are mischievous attempts to harass the firm. However, the dispute has been filed for regulatory approval under “Criminal Proceedings” in Paytm’s July IPO prospectus.
Saxena denied harassment and said that Paytm has a high profile position, which meant that a private person like him was not in a position to harass the company.
Saxena has approached the Securities and Exchange Board of India (SEBI) to put the IPO on hold, arguing that if his claim turns out to be true, investors could lose money, according to an earlier view by Reuters. As per the unreported complaint.
SEBI did not respond to a request for comment.
Sriram Subramaniam of shareholder advisory firm InGovern said the conflict could spark regulatory inquiries and make it difficult or delay the approval of Paytm’s IPO, which could be valued at up to $25 billion.
“Sebi needs assurance that once listed, the company and public shareholders will not be affected,” Subramaniam said.
Whatever the regulator decides, the controversy could become a legal headache ahead of the much-anticipated IPO of Paytm, which counts China’s Alibaba and Japan’s SoftBank among its investors. Neither responded to a request for comment.
At the center of the controversy is a one-page document signed between Saxena and Paytm’s billionaire CEO Vijay Shekhar Sharma in 2001. Seen by Reuters, it says that Saxena was to acquire a 55% equity stake in Paytm’s parent, One97 Communications. The rest is owned by Sharma.
Paytm declined to comment. Sharma did not respond to a request for comment.
police submission
Reuters reviewed a June 29 response the company gave to Delhi Police, where it says the document was “only a letter of intent” that “did not materialize into any definitive agreement”.
The paper “Agreement between One97 Shareholders” was also reproduced by Paytm to the police and signed by two people, showing Paytm’s police submission which is not public.
Paytm’s police filing denies that Saxena was a co-founder.
The rise of Paytm has been phenomenal, with its app being a household name in India for digital payments. The face of the company has been the flamboyant CEO Sharma, 43, whose apps rival the ones he runs. Google and Walmart.
Paytm’s incorporation documents in government databases show Saxena as director of the company between 2000 and 2004.
In response to the police, Paytm agrees that he was one of the first directors of the company’s parent and raised funds for it. But Paytm says it “slowly started losing interest”.
Around 2003–2004, Paytm argued that it had transferred the shares to an Indian firm after it had been “informed” that Saxena had reached a private understanding with them. Saxena said that he never got any shares and there was no such understanding.
Asked why he remained silent for several years, he told Reuters by telephone from the United States that his family had medical problems and had lost important documents he had found only last summer.
“Shares and money are one thing, but I also want to be recognized as a co-founder,” he said. “It’s a question of future generations.”
The matter has reached a court in New Delhi, where Saxena in July urged a judge to pressurize the city police to register a case on her complaint. The court order shows that the police have been asked to respond and the matter will be heard on August 23.
A Delhi Police official said on Thursday that they would give necessary arguments in the court.
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