Paytm Flagged by SEBI for Related-Party Transactions

16 Jul 2024 , 11:29 AM

The market watchdog SEBI has sent an administrative warning letter to One 97 Communications, the parent firm of Paytm. According to the Securities and Exchange Board of India (SEBI), some of the transactions that took place in FY22 between Paytm and the now-defunct Paytm Payments Bank were carried out without the consent of the shareholders or the audit committee of the firm.

Paytm responded to the administrative warning from SEBI by stating that it has always complied with all listing requirements and that it will provide a thorough answer to all of SEBI’s concerns.

One 97 Communications released a letter dated July 15, 2024, outlining SEBI’s administrative warning on the exchanges on Monday. The notice pertains to related party transactions of ₹36 crore and ₹324 crore, respectively. Both the audit committee and the shareholders did not provide their necessary approval for these transactions, which took place in FY 2021–2022, according to SEBI.

According to SEBI’s letter, there was no official sanction for the Paytm and PPBL transactions.

“On one hand, the company claimed that it had provided a cumulative numerical value of the transactions undertaken with PPBL by the Company and its subsidiaries for reference by the shareholders and that transactions between subsidiaries of OCL and PPBL do not qualify as RPTs during the FY 2021-22,” the letter said.

“But, on the other hand, the Board and Audit Committee of the Company have considered transactions between OCL and/or its subsidiaries with PPBL as material RPTs and passed a resolution that RPTs with PPBL will be within the limits as mentioned therein the respective resolutions,” the letter continued.

The market regulator brought attention to differences that existed between the company’s claims of compliance and the transactions that the Board and Audit Committee had classified as substantial related party transactions. In spite of this, Paytm has declared that it has complied with SEBI Listing Regulations Regulation 23 read with Regulation 4(1)(h).

The SEBI stated, “The above violations have been viewed very seriously,” and went on to say that in order to stop this kind of thing from happening in the future, compliance standards needed to be improved. SEBI further stated that if this is not done, the relevant legal enforcement action may be taken.

Paytm was directed by SEBI to submit the letter for remedial action to its board and to submit a report on the activities taken within ten days of receiving the letter.

At 11:26 a.m. on the NSE, Paytm’s shares were down 1.98% at ₹460.30 apiece, while the overall market was up 0.25%.

“The Company considers that it has continuously complied with Regulation 23 in conjunction with Regulation 4(1)(h) of the SEBI Listing Regulations, taking into account any modifications and updates made to these rules over time. The business will reply to SEBI and is dedicated to maintaining and proving the highest compliance standards. According to the aforementioned letter, there is no effect on the company’s financial, operational, or other activities “Paytm stated in a stock exchange filing on Monday night.

The company emphasized in its statement that it has always adhered to regulatory regulations and that it is committed to strong compliance standards. Paytm promised that its operations, finances, or other business operations would not be impacted by this warning. According to the statement, the company is acting to allay SEBI’s worries and improve compliance procedures to avoid similar problems in the future.

“Paytm remains dedicated to maintaining transparency and integrity in all its operations, ensuring adherence to regulatory requirements and the highest standards of corporate governance,” said the business.

Paytm has reaffirmed its commitment to responding fully to SEBI’s concerns and to keeping lines of communication open with the regulatory authority.

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