One 97 Communications Limited, the parent company of Paytm, has received a Show Cause Notice (SCN) from the Directorate of Enforcement (ED) over alleged violations of the Foreign Exchange Management Act (FEMA), 1999 related to its acquisition of two subsidiaries—Little Internet Private Limited (LIPL) and Nearbuy India Private Limited (NIPL).
According to the regulatory filing, Paytm confirmed that the SCN was issued on February 27, 2025, and was received by the company on February 28, 2025. The notice pertains to transactions carried out between 2015 and 2019, involving an aggregate transaction amount of ₹611.18 crore.
Key Allegations Against Paytm
The ED has flagged contraventions under Section 6(3)(a & b) of FEMA, which relates to capital account transactions and investments made outside India. The major concerns raised include transactions attributed to both Paytm and its acquired entities:
- One97 Communications Limited (OCL): ₹245.20 crore
- Little Internet Private Limited (LIPL): ₹344.99 crore
- Nearbuy India Private Limited (NIPL): ₹20.97 crore
The SCN does not specify any immediate financial penalty but directs Paytm and its directors to respond to the alleged violations.
Paytm’s Response & Legal Course
Paytm has stated that it is seeking legal advice and evaluating possible remedies to resolve the issue while adhering to regulatory guidelines. The company emphasized that certain alleged contraventions are related to periods when LIPL and NIPL were not subsidiaries of Paytm, meaning the company did not have operational control over them at the time.
Despite the regulatory scrutiny, Paytm reassured its customers and stakeholders that this development will not impact its daily operations, and all consumer and merchant services remain fully functional and secure.
Regulatory Impact & Market Sentiment
This latest ED action adds to the growing regulatory challenges for Paytm, which has been under scrutiny for compliance issues in the past. While there is no immediate penalty, uncertainty surrounding the outcome of this case may weigh on investor sentiment.
Paytm’s stock may experience volatility in the short term, given the legal implications and possible financial impact. Analysts suggest that the company will need to address compliance concerns proactively to restore investor confidence.
Disclaimer
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