Paytm Tightens ESOP Vesting Rules, Links Employee Rewards More Closely to Performance

One 97 Communications, the parent company of digital payments platform Paytm, has proposed changes to its employee stock option scheme that would make future ESOP vesting more closely dependent on employee and business performance, without increasing the existing option pool.

According to the company’s notice for its 26th Annual General Meeting, amendments to the One 97 Employees Stock Option Scheme 2019 will introduce a graded vesting structure. The proposed changes will require stronger performance for employees to receive the full number of options eligible for vesting. The amendments will require shareholder approval through a special resolution.

Under the current system, employees rated “Meets expectation” or higher were generally eligible to receive 100% of the options due for vesting, while those below that rating were not eligible. The revised framework will instead assess employees through a broader review covering role-specific key result areas, business and company performance, as well as future potential.

Following this assessment, employees will receive an ESOP rating approved by the CEO. Employees rated “Meets expectation” or above could receive between 10% and 100% of their eligible options, depending on their performance. Paytm said the revised system is intended to make ESOP allocation more stringent and differentiated.

The changes will apply only to future ESOP grants. Options already granted under the 2019 scheme will continue under their existing terms, with no changes to the rights of current option holders.

Paytm also clarified that the revision will not increase the company’s ESOP pool or cause additional dilution. As of the AGM notice, around 2.67 crore options remained available for grant under the scheme, including options that could return to the pool due to lapses, surrender or other circumstances. Each option can be converted into one equity share with a face value of ₹1.

The basic vesting timeline will also remain unchanged. Future options can vest over a period beginning one year after the grant and extending up to five years, as determined by the Nomination and Remuneration Committee. Continued employment will remain a prerequisite for vesting.

Paytm said the proposed amendments are aligned with SEBI’s regulations governing share-based employee benefits and listing requirements, while seeking to strengthen the connection between employee incentives, individual performance and long-term shareholder value.

Source: IANS