ASIA PACIFIC Chapter

SEBI has issued a notice to One97 Communications, the parent company of Paytm, regarding employee stock options (ESOPs) granted to its MD and CEO, Vijay Shekhar Sharma, during the financial year 2022. Paytm clarified that this is not a new development and that they have been in regular communication with SEBI, making the necessary representations. The company also stated that it believes it is compliant with relevant regulations, and this issue has no impact on its financial results for the year ended March 31, 2024.

Swiggy has announced its fifth ESOP liquidity program, allowing employees to receive up to $65 million for their stock options. This marks the company's fifth liquidity event since 2018, cumulatively enabling over Rs 1000 crore of ESOP liquidity and benefiting more than 3,200 employees. The program aligns with Swiggy's commitment to rewarding employees and comes as the company approaches its 10th anniversary, amidst similar moves by its competitor Zomato.

Paytm has expanded its employee stock option plan (ESOP) by allocating 281,394 equity shares to retain talent, bringing its total equity share capital to Rs 636,274,090. The shares will be issued under the Employee Stock Option Schemes of 2019 and 2008, allowing employees to purchase company shares at a predetermined price. This move occurs amid potential layoffs and regulatory challenges, as the company reported a significant loss of Rs 549.6 crore in the fourth quarter of 2023-24.

Paytm's board approved the allotment of 87,373 stock options under its ESOP 2019 plan, with each option priced at INR 9, totaling INR 63,57,92,534 in share capital. This move aims to retain talent and boost productivity amidst controversies and top-level reshuffling, with the company's stock experiencing a significant decline. Paytm joins other Indian tech firms in strengthening its ESOP scheme, reflecting a trend in the industry.

Research indicates that while board gender quotas can enhance female representation at the board level, they do not increase the number of women appointed to executive positions within organizations, as seen in India's case. Instead, appointing women to positions of authority on boards, such as executive directors, positively impacts the careers of women at lower levels, potentially due to their influence in senior management recruitment. The study underscores the need for policies that focus on increasing women's representation across all levels of senior management, rather than solely targeting board appointments, as highlighted by the forthcoming Women on Boards directive in the European Union.

India's robust IPO activity in 2023, with 234 listings raising US$7.89 billion, reflects the country's strong domestic economy and rising corporate earnings, positioning it as a bright spot amid global IPO trends. The second half of the year saw particularly buoyant activity, contributing to India's climb to the world's seventh-largest market by total market capitalization. With momentum carrying into 2024, India anticipates further IPOs across various sectors, driven by favorable market conditions, increasing foreign capital inflows, and a growing middle class investing in equity markets. Additionally, initiatives like the establishment of an international finance center in Gujarat aim to enable Indian businesses to access global capital markets more efficiently, signaling India's outward-looking approach amid its rise as a leading global economy.

From 1 October 2023, the withholding rate for Indian Tax Collected at Source (TCS) on foreign remittances will increase from 5% to 20%. The INR 700,000 exempt threshold for TCS will remain in place, providing relief to individuals subject to the tax. However, the higher TCS rate above the exempt threshold may impact participation rates in employee share purchase plans, as individuals will receive reduced benefits and may face challenges reclaiming the TCS.

ESOPs and RSUs have gained popularity in India, especially in start-up jobs, and international companies with employees in India also offer these employee benefit plans. ESOPs allow employees to own equity shares of the employer company over time, and the taxation of ESOPs occurs at two instances: at the time of exercise and at the time of sale by the employee. The taxation rules differ for listed and unlisted shares, and other factors such as the residential status and disclosures also come into play in determining the tax implications of ESOPs.

The recent alert informed companies about the increase in Tax Collected at Source (TCS) rate to 20% for overseas remittances of participant funds in India, starting from 1 July 2023. However, following concerns from businesses and residents, the Indian Ministry of Finance made last-minute changes, including restoring the annual threshold of INR 700,000 and delaying the implementation of the 20% TCS until 1 October 2023 for individuals exceeding the threshold.