Paytm Clarifies SEBI’s Show-Cause Notice Amid Allegations

Paytm addresses SEBI’s show-cause notice regarding IPO misrepresentations and CEO classification, amid ongoing regulatory scrutiny.

SEBI Show-Cause Notice to Paytm

Paytm, under the leadership of Vijay Shekhar Sharma and its parent company One 97 Communications Ltd., recently responded to media reports about a show-cause notice from the Securities and Exchange Board of India (SEBI). This notice relates to alleged misrepresentations during Paytm’s Initial Public Offering (IPO) in November 2021. According to Paytm, this issue is not new and had already been disclosed in its financial statements for the fiscal year ending March 31, 2024, as well as for the quarter ending June 30, 2024.

Clarifications on Financial Disclosures

In response to the reports, Paytm filed a clarification with the Bombay Stock Exchange (BSE), stating that the allegations regarding the SEBI notice had already been addressed in their financial results for the quarters ending March 31, 2024, and June 30, 2024. The company emphasized that these issues were previously disclosed, and their financial statements for these periods remain unaffected by the notice.

SEBI’s Concerns Over CEO Classification

The SEBI notice also raises concerns about the categorization of Vijay Shekhar Sharma as a promoter during Paytm’s IPO. SEBI argues that Sharma’s control over management should have led to his classification as a promoter, which would have disqualified him from receiving employee stock options (ESOPs) post-IPO. The notice further implicates the board members at the time of the IPO for not ensuring that the promoter classification standards were correctly followed.

Paytm, however, maintains that it is in continuous dialogue with SEBI and is providing all necessary representations regarding the issue. The company also mentioned that it had sought an independent legal opinion, which supports their compliance with applicable regulations.

Ongoing Regulatory Challenges

SEBI’s investigation into these issues was prompted by a report from Moneycontrol, which highlighted that the probe was based on information from the Reserve Bank of India (RBI). The RBI had previously scrutinized Paytm Payments Bank earlier in the year.

This SEBI notice is one of several regulatory challenges Paytm has faced recently. Earlier this month, One 97 Communications was fined Rs 47.12 lakh by the Office of Collector of Stamps in New Delhi for failing to pay stamp duty on equity shares. In a separate incident, Paytm Payments Bank was fined Rs 5.49 crore by the Financial Intelligence Unit of India (FIU-IND) for violations of the Prevention of Money Laundering Act.