One97 Communications Ltd. (OCL), the parent company of digital payments giant Paytm, has been issued a show-cause notice by the Enforcement Directorate (ED) for alleged contraventions of the Foreign Exchange Management Act (FEMA). The notice pertains to transactions totaling over ₹611 crore, linked to the acquisition of two subsidiaries, Little Internet Private Limited (LIPL) and Nearbuy India Private Limited (NIPL), during the years 2015 to 2019.
Breakdown of Alleged Violations
The ED’s notice, dated February 27, 2025, outlines specific amounts associated with the alleged violations:
- One97 Communications Ltd. (OCL): ₹245 crore
- Little Internet Private Limited (LIPL): ₹345 crore
- Nearbuy India Private Limited (NIPL): ₹20.9 crore
These figures relate to certain investment transactions involving OCL, LIPL, and NIPL.
Company’s Clarification
In response to the notice, Paytm clarified that the alleged violations concerning LIPL and NIPL occurred before these entities became its subsidiaries. The company stated, “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.”
Legal Response and Operational Continuity
Paytm has expressed its intent to address the matter in accordance with applicable laws and regulatory processes. The company is seeking necessary legal advice and evaluating appropriate remedies. Importantly, Paytm emphasized that this development has no impact on its services to consumers and merchants, which remain fully operational and secure.
Background on Subsidiary Acquisitions
In 2017, Paytm acquired Little Internet and Nearbuy India, both operating in the hyperlocal deals space, and subsequently merged them to bolster its offline commerce presence. Little Internet had previously secured approximately $50 million in equity funding from Tiger Global Management and Elevation Capital, while Nearbuy India, co-founded by Ankur Warikoo, had raised around $22 million from Peak XV Partners (formerly Sequoia India).
Market Reaction and Share Performance
Following the disclosure of the ED’s notice, Paytm’s shares experienced a decline. On March 3, 2025, the stock fell by 4.4% to an intraday low of ₹685 on the Bombay Stock Exchange (BSE). Year-to-date, the stock has declined by 27%, although it has gained 76% over the past year. The company’s market capitalization currently stands at ₹45,676 crore.
Economic Times
Previous Regulatory Scrutiny
This is not the first instance of regulatory scrutiny faced by Paytm. In August 2024, the Securities and Exchange Board of India (SEBI) issued show-cause notices to Paytm’s founder, Vijay Shekhar Sharma, and other board members over alleged misrepresentation of facts during the company’s November 2021 Initial Public Offering (IPO). The issue centered around Sharma’s classification as an employee rather than a large shareholder, which could influence company decisions.
As Paytm navigates this latest regulatory challenge, the company’s management is focused on resolving the matter through appropriate legal channels. Stakeholders and investors will be keenly observing the developments, given the potential implications for the company’s operations and reputation.
In conclusion, the issuance of the ED’s show-cause notice adds to the series of regulatory hurdles faced by Paytm in recent years. The company’s proactive approach to seeking legal counsel and its assurance of uninterrupted services aim to mitigate concerns among consumers and investors alike.