Paytm IPO: Ex-Director Seeks To Stall $2 Bn Issue, Company Calls It 'Harassment'

The dispute is connected to the crucial one-page document signed between Saxena and Paytm's billionaire CEO, Vijay Shekhar Sharma, in 2001

Paytm Logo | File Image

New Delhi: The much-touted IPO of the year of the digital payments provider Paytm's $2.2 billion has hit an initial roadblock with the company’s 71-year-old former director urging markets regulator Securities and Exchange Board of India (Sebi) to stall the offering.

Ashok Kumar Saxena, a co-founder has made a police complaint of fraud against the company alleging that he invested $27,500 two decades ago but never got shares, as per the news agency Reuters.

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In response to the claims, Paytm has said the allegations of fraud in a police complaint are mischievous attempts to harass the firm, as per the legal documents assessed by Reuters. Although the dispute is cited under "criminal proceedings" in Paytm's July IPO prospectus filed for regulatory approval.

What are alleged allegations against Paytm?

The dispute is connected to the crucial one-page document signed between Saxena and Paytm's billionaire CEO, Vijay Shekhar Sharma, in 2001. According to Reuters, the document says Saxena was to get a 55 percent equity stake in Paytm's parent, One97 Communications, with Sharma owning the rest.

Saxena has approached the SEBI to stall the issue warning that investors could lose money if his claim is proved right, according to a previously unreported complaint seen by Reuters. Saxena, who registered the complaint, has denied harassment saying the company which is in a high profile position would mean a private individual like him was not in a position to harass the company.

Will it impact the IPO?

The recent complaint may trigger regulatory inquiries and complicate or delay the approval of Paytm's IPO that could value it at up to $25 billion, Shriram Subramanian of shareholder advisory firm InGovern was quoted in the report.

"SEBI will need assurance that it will not impact the company and the public shareholders once listed," Subramanian said.

Apart from the decision of the regulator on the issue, the case might turn into a legal hassle prior to the much-awaited IP. The company has been backed by China's Alibaba and Japan's SoftBank among its investors

Meanwhile, the company's response to the Delhi Police states that the document was "merely a letter of intent" which "did not materialize into any definitive agreement". The "Agreement Between Shareholders of One97" paper, which was also reproduced by Paytm before police and signed by the two men, shows Paytm's police submission which is not public, as per the agency.

Paytm denies Saxena’s claim as co-founder

Paytm has witnessed phenomenal growth with its app becoming a household name for digital payments. As per Paytm's incorporation documents in the government database, Saxena is shown as a director of the company between 2000 and 2004. In its police response, Paytm has agreed he was among the first directors of the company's parent and extended the funds to it, but "gradually lost interest".

Around 2003-2004, Paytm argues it had transferred the shares to an Indian firm as it was "informed" that Saxena had reached a private understanding with them. Saxena said he never received any shares and there was no such understanding.

On being probed about being silent for several years, Saxena said that he had medical issues in his family and had misplaced key documents which he only found last summer.

"The shares and money are one thing, but I also want to be recognized as the co-founder," he said. "It's a question of posterity."