Paytm Gets Administrative Warning From SEBI On Related Party Transactions With Payments Bank

Paytm’s parent company One 97 Communications has received an administrative warning letter from market regulator SEBI over related party transactions conducted by the company with Paytm Payments Bank for FY22.

SEBI’s administrative warning, detailed in a letter dated July 15, 2024, highlights related party transactions worth INR 324 Cr and INR 36 Cr conducted during FY 2021-22. The market regulator said that these transactions did not receive the necessary approvals from either the audit committee or the shareholders.

“The company is committed to upholding and demonstrating the highest compliance standards and shall also submit its response to SEBI,” the letter said.

As per SEBI, non-compliances were observed during the course of the examination. “The excess related party transactions (RPTs) entered into by the company and its subsidiaries with PPBL during the FY 2021-22 were conducted without the due approval of either the audit committee or the shareholders.”

It added, “On one hand, the company claimed that it had provided a cumulative numerical value of the transactions undertaken with PPBL by the Company and its subsidiaries for reference by the shareholders and that transactions between subsidiaries of OCL and PPBL do not qualify as RPTs during the FY 2021-22.”

However, the Board and Audit Committee of the company considered these transactions as material RPTs and passed a resolution that RPTs with PPBL would be within the limits as mentioned in the respective resolutions. The details of excess RPTs between OCL and/or its subsidiaries with PPBL, which were conducted without due approval, are tabulated as follows.

The market regulator highlighted discrepancies between the company’s claims of compliance and the transactions identified as significant related party transactions by the Board and Audit Committee. 

In response to the SEBI Administrative Warning, Paytm, said that it has consistently adhered to all listing regulations from time to time, including any amendments and updates to these regulations over time.

“The warning pertains to the excess RPTs entered into by Paytm and/or its subsidiaries with Paytm Payments Bank Limited (PPBL) during FY 2021-22, which were allegedly conducted without the due approval of either the audit committee or shareholders,” the company said in a filling.

The company affirmed its commitment to maintaining high compliance standards and pledged to submit a comprehensive response to SEBI addressing the regulator’s concerns.

“The Company believes it has consistently acted in compliance with Regulation 23 read with Regulation 4(1)(h) of the SEBI Listing Regulations, including any amendments and updates to these regulations over time. The Company is committed to upholding and demonstrating the highest compliance standards, and shall also submit its response to SEBI. There is no impact on financial, operation or other activities of the Company pursuant to the above-mentioned letter,” said Paytm in a stock exchange filing on Monday night.

This comes days after Japanese tech investor SoftBank reportedly exited troubled fintech major Paytm in the June quarter (Q1) of the ongoing fiscal year at a loss of $150 Mn. 

Since February, Paytm’s shares have faced pressure following the Reserve Bank of India’s (RBI) announcement of curbs on Paytm Payments Bank. Consequently, Paytm reported a more than threefold increase in net loss to INR 550.5 Cr in Q4 FY24, up from INR 167.5 Cr in the same quarter last year. Additionally, its revenue decreased by 2.9% year-on-year to INR 2,267.10 Cr during the quarter.

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