Vijay Shekhar Sharma-led Paytm issues clarification on SEBI show-cause notice

Vijay Shekhar Sharma-led Paytm, through its parent company One 97 Communications Ltd., has issued a clarification regarding reports of a show-cause notice from the Securities and Exchange Board of India (SEBI).

The notice reportedly involves alleged misrepresentation of facts during Paytm's Initial Public Offering (IPO) in November 2021.

However, Paytm emphasized that this is not a new issue and had already been disclosed in its financial statements for the fiscal year ending March 31, 2024, and the quarter ending June 30, 2024.

Company's official response

In an official filing with the Bombay Stock Exchange (BSE), Paytm stated, "With reference to recent media reports, we would like to inform you that this is not a new development, as the Company had already made relevant disclosures on this matter in its financial results for the quarter and year ended March 31, 2024, as well as the quarter ended June 30, 2024.”

The company also clarified that there has been no impact on its financial results for previous quarters ended June 30, 2024, and March 31, 2024, respectively.

SEBI's allegations and Paytm's legal position

According to reports, SEBI's notice questions the classification of Vijay Shekhar Sharma, Paytm's CEO, as a promoter.

The regulator argues that Sharma's management control should have led to him being classified as a promoter, which would have disqualified him from receiving employee stock options (ESOPs) after the IPO. The notice also extends to board members who served during the IPO, alleging that they failed to ensure compliance with promoter classification norms.

Paytm, however, asserts that it is in regular communication with SEBI and is making necessary representations regarding this matter. The company mentioned that it has obtained an independent legal opinion, which supports its compliance with relevant regulations.

Recent media reports

The issue gained attention after a report by Moneycontrol highlighted SEBI's concerns. The report mentioned that the probe was initiated based on inputs from the Reserve Bank of India (RBI), which had examined Paytm Payments Bank earlier in the year. 

This SEBI notice is part of a series of regulatory challenges Paytm has faced recently. Earlier this month, the Office of Collector of Stamps, New Delhi, imposed a penalty of Rs 47.12 lakh on One 97 Communications for failing to pay stamp duty on equity shares.

Additionally, the Financial Intelligence Unit-India (FIU-IND) fined Paytm Payments Bank Rs 5.49 crore for violations of the Prevention of Money Laundering Act.