Paytm’s run-ins with India’s regulatory authorities seem to never end.
Paytm has received a show-cause notice from the Directorate of Enforcement (ED) over alleged violations of foreign exchange rules. The violations were under India’s foreign exchange management laws (FEMA) and amounted to Rs. 611 crore. These payments were related to the investments Paytm had made in its subsidiaries.
“We hereby inform that a show cause notice dated February 27, 2025 has been received by the Company on February 28, 2025 at 19.27 Hrs,” from the Directorate of Enforcement, Government of India,” Paytm said in a filing to the stock exchanges. “This is in relation to alleged contraventions for the years 2015 to 2019 of certain provisions of the Foreign Exchange Management Act, 1999 (“FEMA”) by the Company, in relation to its acquisition of two subsidiaries namely Little Internet Private Limited (“LIPL”) and Nearbuy India Private Limited (“NIPL”) erstwhile Groupon, along with certain Directors & Officers,” it added.
“The allegations against the Company are regarding compliance to FEMA regulations in relation to its investments in Little Internet Private Limited and NearBuy India Private Limited. Certain alleged contraventions attributable to two acquired companies – Little Internet Private Limited and NearBuy India Private Limited – pertain to a period when these were not subsidiaries of the Company,” Paytm said.
“To resolve the matter in accordance with applicable laws and regulatory processes, the Company is seeking necessary legal advice and evaluating appropriate remedies. Paytm upholds principles of transparency, governance, and compliance in all its business practices. This matter is being addressed with a focus on resolving it in accordance with applicable laws. There is no impact of this matter on Paytm’s services to its consumers and merchants, and all services are fully operational and secure, as always,” it added.
Paytm had acquired hyper local deals platforms Little Internet and Nearbuy in 2017 and merged the two brands. Little Internet was funded by Tiger Global Management and Elevation Capital. It had raised around $50 million in equity funding. Nearbuy, cofounded by Ankur Warikoo, was backed by Peak XV Partners (then Sequoia India) and had raised around $22 million in equity funding. The ED has identified non-compliance involving investments of Rs. 245 crore in One97 Communications, Rs. 345 crore in Little Internet and Rs 20.9 crore in Nearbuy India, Paytm said.
This is the latest in a series of regulatory actions thcat Paytm has had to face in recent years. As far back as in 2018, the RBI had directed Paytm Payments Bank to stop adding new customers over concerns over its KYC process and how it stores customer data. Over the next few years, Paytm’s Payments Bank was again pulled up several times over lapses in governance, and its operations were all but shut by the Reserve Bank in early 2024. In February, it had been reported that the Enforcement Directorate was likely to investigate Paytm over non-compliances. In July 2024, Paytm was given an administrative warning by SEBI over old transactions with Paytm Payments Bank, and in May 2024, SEBI had issued a show-cause notice to Paytm over ESOPs given to Vijay Shekhar Sharma. Last month, SEBI had fined Paytm’s board members Rs. 3.3 crore over signing documents that contained inaccurate information while deciding the benefits to be given to Sharma and his relatives. And with now ED sending a show-cause notice to the company once again, Paytm’s travails with India’s regulators don’t seem to end.