Fintech platform Paytm has received show cause notice from the Securities and Exchange Board of India, SEBI, over the Employee Stock Ownership Plan, ESOP, granted to its founder and CEO, Vijay Shekhar Sharma.
In a regulatory filing, the fintech platform said, “During the previous quarter, the company had received a Show Cause Notice ("SCN") from SEBI related to the above options regarding compliance with SEBI SBEB Regulations.”
The fintech platform has mentioned that it provided an initial response and is currently requesting additional information from SEBI on the matter. An independent legal opinion obtained by the management suggests that the company is in compliance with the relevant regulations, according to the company statement.
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The regulatory filing by the company also highlights that the showcase notice has no impact on the financial results for the quarters ending on June 30, 2024, and March 31, 2024. The market regulator has raised concerns about whether Paytm adhered to the regulations concerning the 21,000,000 Employee Stock Options (ESOP) that were granted to its Managing Director and CEO, which are linked to specific targets.
Additionally, fintech firm One97 Communications, which owns the Paytm brand, on Friday said its loss has widened to Rs 840 crore in the quarter ended June 30, primarily due to the continued impact of restrictions on Paytm Payments Bank Ltd.
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The company had posted a loss of Rs 358.4 crore in the same period a year ago, according to a regulatory filing by the company.
The consolidated revenue of Paytm declined 33.48 percent to Rs 1,639.1 crore during the reported quarter, up from Rs 2,464.2 crore in the same period a year ago.
A Paytm spokesperson attributed the widening of losses and decline in revenue primarily to the disruption in business due to restrictions imposed on associate company Paytm Payments Bank Limited (PPBL) by the Reserve Bank of India (RBI).
The RBI barred PPBL from accepting deposits, credit transactions, or top-ups in any customer accounts, wallets, or FASTags, keeping in view the interests of customers, including merchants, from March 15 onwards.
"There were three factors that have led to this (decline in revenue and widening of loss), which are primarily disruptions on account of PPBL products like Wallet. We stopped using Wallet and some of the products," the spokesperson said.
The company also temporarily stopped some of the products on which regulators may have concern at an industry-level.
"We temporarily stopped a lot of those products, and those products are in the process of starting. The third factor is that because of the disruption, our merchant base and GMV (gross merchandise value) came down, and that has an impact on profitability overall," the spokesperson said.
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(With inputs from PTI)
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