On July 15, 2024, Securities and Exchange Board of India (SEBI) issued an administrative warning to One97 Communications Limited [OCL]. The parent company of Paytm was warned regarding certain transactions with its Associate, Paytm Payments Bank Limited [PBBL], during the financial year 2021-2022.
Violation Details
SEBI highlighted two related party transactions that were conducted between OCL & PBBL without the necessary approvals. The transactions in question amounted to INR 324 crore and INR 36 crore which were in excess of approvals received. These transactions did not have the approval of either the audit committee or the shareholders. It is required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
Also Read | ‘Aditi’, an affordable health insurance by Narayan Health: Check how this can revolutionize insurance sector
Seriousness of Violations
In a letter dated July 15, 2024, SEBI stated that these violations were very serious. SEBI warned Paytm to improve its compliance standards to avoid similar issues in the future. The regulator also mentioned that failure to comply could lead to appropriate enforcement actions.
Required Actions
SEBI has instructed Paytm to place the warning letter to its board and take necessary corrective actions. Paytm must then submit a report to SEBI within 10 days detailing the actions taken in response to the warning.
Paytm’s Response
In response to the warning, Paytm has stated that it has always complied with SEBI regulations and is committed to maintaining high compliance standards. The company assured that there will be no impact on its financial, operational, or other activities and that it will respond to SEBI soon.
Past Regulatory Action
Earlier this year, on January 31, the Reserve Bank of India (RBI) barred Paytm Payments Bank from undertaking any banking activities. This included accepting deposits and processing credits or wallet top-ups.
Stock Performance
Despite the regulatory warning, shares of Paytm ended 0.7% higher on Monday at INR 469.1. The stock has increased by 13% over the last month. Although, it remains significantly lower than its IPO price of INR 2,150.
Also Read | “Bajaj Ki Guarantee” For World’s First CNG Motorcycle: Freedom 125 For The Independent India
SEBI’s warning serves as a reminder for companies to strictly adhere to regulatory requirements. Companies concerning related party transactions should specially take care. Paytm’s commitment to addressing the issues and ensuring compliance will be crucial. They will maintain investor’s confidence and avoid further regulatory actions.
About the Author
Mr. Radhesh Tarang Shah, is a management student at Institute of Management, Nirma University. He has a passion for writing articles and poems. He has experience as a financial analyst, author, news writer, marketer and social worker.
