NEW DELHI - Paytm's $2.2 billion IPO is facing an unusual hurdle - a 71-year old former director has asked Indian market regulator to stall the offering, alleging he is a co-founder who invested $27,500 two decades ago but never got shares.
In legal documents seen by Reuters, Paytm says that the claim by Ashok Kumar Saxena and allegations of fraud in a police complaint in New Delhi are mischievous attempts to harass the firm. The dispute is filed under regulatory proceedings in Paytm's July IPO prospectus cited for criminal approval.
Saxena denied harassment and said Paytm had a high profile position that meant a private individual like him was not in a position to harass the company.
Saxena approached the Securities and Exchange Board of India to stall the IPO, arguing investors could lose money if his claim is proved right, according to an otherwise unreported complaint seen by Reuters.
SEBI did not respond to a request for comment.
Shriram Subramanian of the analyst firm InGovern said the tussle could spark regulatory inquiries and delay the approval of Paytm's IPO that could value it at more than $25 billion.
Subramanian will need assurance that it will not impact the company and the public shareholders once listed, SEBI said.
Irrespective of what the regulator decides, the dispute could become a legal headache ahead of the much anticipated IPO of Paytm by Hong Kong's Alibaba and Japan's SoftBank among its investors. As of this writing, neither has responded to a request for comment.
At the core of the dispute is a one-page document signed between Saxena and Paytm's CEO Vijay Shekhar Sharma in 2001. Seen by Reuters, it says Saxena was going to get a 55% equity stake in Paytm's parent company One97 Communications with Sharma controlling the rest.
Paytm declined to comment. Sharma did not respond to a request for comment.
Reuters reviewed a June 29 response the company gave to the Delhi Police, where it says the document was merely a letter of intent which did not materialize into any definitive agreement.
The agreement between Shareholders of One 97 paper, signed by Paytm before police and reproduced by the two men, shows Paytm's police submission which is not public.
Paytm's rise has been phenomenal, with its app a household name in India for digital payments. The face of the company has been flamboyant CEO Sharma, 43, who has an app rival those run by Google and Walmart.
Paytm's corporate documents in the government database show Saxena as a director of the company between 2000 and 2004. In its first response Paytm agrees that he was among the first directors of the company's parent and extended the funds to it. But he slowly did lose interest, Paytm says.
Around 2003 - 2004, Saxena argues it had transferred the shares to an Indian firm as it was informed that Paytm had reached a private understanding with them. Saxena said he never received any shares and there was no such understanding.
Asked why he had been silent for several years, he told Reuters by telephone from the United States that he had medical issues in his family and had misplaced key documents that he found only last summer.
The shares and money are one thing, but I also want to be recognized as the co-founder, he said. The matter reached a New Delhi court, where Saxena in July ordered a judge to press the city police to register a case on his complaint. The court order shows police have been asked to respond and the case will be heard on Aug. 23.
A Delhi Police official said on Thursday that they would be required to make submissions to the court.