Paytm Parent One 97 Communications, Linked Entities Receive ED Notice Over Rs 611 Crore Forex Violation

The Enforcement Directorate on Monday announced that it has issued a notice to Paytm's parent company—One97 Communications Ltd.—its managing director, and linked entities for "contravention" of the Foreign Exchange Management Act to the tune of Rs 611 crore.

Paytm's annual report for the financial year 2024 states that its founder, Vijay Shekhar Sharma, is its chairman, managing director, and chief executive officer.

Meanwhile, a Paytm spokesperson said that the company was working to resolve the matter in accordance with applicable laws and regulatory processes.

The notice has been issued by a special director of the federal agency after the completion of an investigation and before the initiation of adjudication proceedings under the said law.

The show cause notice has been issued to Paytm's flagship company, One 97 Communication, its managing director, and other Paytm subsidiaries such as Little Internet Pvt. and Nearbuy India Pvt. for "contraventions" of the provisions of the FEMA to the tune of around Rs 611 crore, the ED said in a statement.

Investigations found that OCL made foreign investments in Singapore and "did not" file necessary reporting to the Reserve Bank of India for the creation of an overseas step-down subsidiary, it said.

The company had 'also received foreign direct investment from overseas investors without following proper pricing guidelines stipulated by the RBI,' it alleged.

The ED said OCL's subsidiary company in India—Little Internet Pvt.—received FDI from overseas investors "without following" the pricing guidelines stipulated by the RBI.

The other subsidiary—Nearbuy India Pvt.—"did not" report the FDI received by the company within the time frame prescribed by the RBI, it said.

In a regulatory filing made on Saturday (March 1), Paytm said it received a notice from the ED for alleged violation of certain FEMA rules by the company and its two subsidiaries—Little Internet and Nearbuy—with respect to certain investment transactions.

Later, Paytm clarified that the alleged breach pertains to the period when the two companies were not its subsidiaries. It acquired the two companies in 2017.

According to the breakup shared by the company, OCL transactions amounting to over Rs 245 crore, LIPL's about Rs 345 crore, and NIPL's about Rs 21 crore have been listed in the alleged breach.

"The alleged contraventions relate to certain investment transactions relating to OCL, LIPL, and NIPL," it stated.

In a statement, a Paytm spokesperson said, "We are working towards resolving the matter in accordance with applicable laws and regulatory processes. We remain committed to strengthening processes in adherence and upholding the highest standards of compliance and governance."

The company's shares had plunged more than 4% following the reports of the ED notice.

However, shares of One 97 Communication Ltd. closed 1.38% higher at Rs 726.20 apiece on the BSE, compared to a 0.15% decline in the benchmark Sensex.

(With inputs from PTI.)