Paytm parent's related party transactions with Paytm Payments Bank approved

While 72% of all votes polled were favoured the resolution, almost 67% votes on account of public institutional investors were against

Shareholders of One97 Communications (OCL), the parent company of fintech major Paytm, have approved the company’s related party transactions (RPTs) with Paytm Payments Bank (PPB), according to regulatory filings last week.

While 72 per cent of the total votes polled were in favour of the resolution, almost 67 per cent of the votes on account of public institutional investors went against it. More than 26 crores votes showed as ‘abstained’ as they are related party members. According to regulations, related party members can either abstain or vote against the resolution.

The particulars of Paytm’s resolution on material related party transactions was shared with all member shareholders in a detailed note that has also been filed with the stock exchanges on February 24, 2022. The fintech major emphasised in the note that the related party transactions with PPBL shall not, in any manner, be detrimental to the interest of minority shareholders and will be in the best interest of the company.

“As the percentage of RPT to turnover is significant, we recommend the company to disclose details of the valuation as well as the accounting firm hired for the same. However, since this is a part of the routine business of the company, we recommend shareholders vote for the resolution,” said an analyst note on the resolution by corporate governance advisory InGovern before the vote.

“For Paytm, we understand that entering into such transactions with associates is a part of the routine business. Also, the company has obtained a transfer pricing report from an independent valuator,” it added.

The RPTs were of two kinds – availing of services from PPB and rendering services to the entity. While the former includes Rs 1,078 crore in FY20, Rs 984 crore in FY21 and an estimated Rs 985 crore in FY22, the amounts for the respective periods with regards to rendering services are Rs 991 crore, Rs 939 crore and Rs 1,050 crore.

The share of RPT to turnover for availing services is an estimated 35 per cent in FY22 and that for rendering services is an estimated 37 per cent, according to data from InGovern.

OCL’s shareholding in Paytm Payments Bank is governed by a shareholder agreement. All new business arrangements, or changes to existing business arrangements, between the company and Paytm Payments Bank are done at arm’s length basis, and are subject to approval by the audit committee and  board. The company’s founder, who owns 51 per cent in Paytm Payments Bank, is not on the audit committee, and recuses himself for voting on these matters at board and shareholder meetings.

Paytm’s shares have been in a free fall since its blockbuster initial public offering (IPO) in November last year. The company’s stock was trading at Rs 571 on the BSE at the end of the trading session on Friday, down 74 per cent from its IPO price of Rs 2,150.