Paytm CEO Vijay Shekhar Sharma
The Securities and Exchange Board of India (Sebi) has issued show-cause notices to Vijay Shekhar Sharma
The Securities and Exchange Board of India (Sebi) has issued show-cause notices to Vijay Shekhar Sharma, founder of One 97 Communications Ltd (Paytm’s parent), and board members who served during its initial public offering in November 2021 for alleged misrepresentation of facts, two people with direct knowledge of the matter, moneycontrol.com reported.
Shares of One97 Communications Ltd., parent company of payments aggregator Paytm fell as much as 8%.
The report states citing sources that market regulator Securities and Exchange Board of India (SEBI) has issued show-cause notices to Paytm founder Vijay Shekhar Sharma and board members who served at the company during its Initial Public Offering (IPO) in November 2021 for alleged misrepresentation of facts.
The notices issued by SEBI pertain to Sharma’s alleged non-compliance with promoter classification norms, the report further stated, adding that the probe was initiated based on inputs from the Reserve Bank of India (RBI), which had earlier imposed restrictions on the Paytm Payments Bank earlier.
The core issue revolves around Sharma’s classification as a promoter, despite holding management control rather than merely being an employee when filing the IPO documents.
Sharma is classified as a public shareholder, not a large shareholder, according to exchange data, which also says Paytm has no investors categorised as “large shareholders.”
This classification is crucial because Sebi regulations prohibit promoters from receiving employee stock options (ESOPs) post-IPO. The probe was reportedly triggered by inputs from the Reserve Bank of India (RBI), which had earlier examined Paytm Payments Bank.
In addition to Sharma, SEBI also issued notices to the company’s former directors, questioning their endorsement of Sharma’s classification as a non-promoter. The investigation seeks to determine whether Paytm’s leadership accurately represented Sharma’s role and stake in the company during the IPO.
In a stock exchange filing made on Monday evening Paytm said “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 is in regular communication with the Securities Exchange Board of India (SEBI) and making necessary representations regarding this matter. Accordingly, there is no impact on the financial results for previous quarters ended June 30, 2024, and March 31, 2024, respectively.”
Shares of Paytm are currently trading 8 per cent lower at Rs 512.25. The stock had gone public in 2021 at an IPO price of Rs 2,150, a level that it has not seen till date and fell to an all-time low of Rs 310 earlier this year.
