One97 Communications Ltd, the operator of Paytm, is set to extend Rs 743 crore funding to two companies owned by founder Vijay Shekhar Sharma ahead of its $3 billion IPO planned this year, Mint

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reported. As per a notice sent to Paytm shareholders which were reviewed by Mint, the proposal, among others, will be put to vote at the company’s annual meeting which is scheduled on June 30. The note to the shareholders was sent after Paytm’s board meeting on May 28.

According to the proposal, Paytm, in one or two tranches will buy Rs 491.93 crore worth of optionally convertible debentures, to be sold by VSS Holdings Pvt. Ltd, in which Sharma is a director. The debentures will mature in 10 years and bear an annual interest of 15 percent.

Paytm will own 96 percent in VSS on converting the debentures into shares, which can be done at any time. Paytm said VSS will utilize the funds for its primary business activities.

As per filings with the registrar of companies, VSS Holdco is involved in activities closely related to financial intermediation, except insurance and pension funding. Paytm’s other proposal is to loan Rs 250.79 crore to VSS Investco Pvt. Ltd through inter-corporate deposits, or ICDs, in one or more tranches, the Mint report further said.

According to the note sent to shareholders, VSS Investco will have to repay the amount within 12 months or before Paytm goes public. Paytm also said Sharma will raise external funding or sell his shares in the company to repay the loan, and the money will be used for the principal business activities of VSS Investco.

VSS Holdco and VSS Investco were both were incorporated in January 2020 and are engaged in similar businesses.