Markets regulator Securities and Exchange Board of India (SEBI) has issued a show cause notice to Paytm founder Vijay Shekhar Sharma and One 97 Communications Ltd (Paytm’s parent) board members who during its initial public offering (IPO) in November 2021 for alleged misrepresentation of facts, according to a report by Moneycontrol on Monday.
Paytm shares tanked 9 per cent to touch the day’s low of Rs 505.55 per share on the NSE.
According to the report, SEBI notices are related to Sharma’s alleged non-compliance with promoter classification norms and an investigation was launched based on inputs from the Reserve Bank of India (RBI), which had earlier imposed restrictions on the Paytm Payments Bank.
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The key concern is whether Sharma should have been classified as a promoter, given that he had management control rather than an employee while filing the IPO papers. The markets watchdog also issued show-cause notices to the company’s directors at that time, questioning them for endorsing Sharma’s stance, as per Moneycontrol report.
The Paytm founder would have been ineligible for employee stock options (ESOPs) after the listing as SEBI norms prohibit promoters from receiving ESOPs post-IPO.
In 2024 so far, the stock has plunged over 18 per cent as per NSE. In the last one year, the stock has given negative returns of nearly 41 per cent.
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Paytm, which debuted on the stock markets in November 2021 with an issue price of Rs 2,150, has failed to reach that level and dropped to an all-time low of Rs 310 earlier this year after RBI action.
In January this year, RBI barred Paytm Payments from accepting new deposits from March 15 and ruled out any review of its action against the company. The central bank had cited persistent non-compliances and continued material supervisory concerns, for the regulatory action.
