Paytm Shares Recover Despite ED Notice Over Alleged FEMA Violations

Shares of Paytm's parent company, One97 Communications, made a notable recovery on Monday, March 3, bouncing back from early-session losses triggered by regulatory concerns. Despite an initial slump due to a notice from the Enforcement Directorate (ED), Paytm's stock closed nearly 2% higher, signaling investor confidence amid regulatory challenges.

Stock Performance Details​

In early trading, Paytm’s shares dipped roughly 4% following reports that the fintech giant received a show-cause notice from the ED, alleging violations of Foreign Exchange Management Act (FEMA) regulations. However, investor sentiment shifted positively, leading the company's shares to close with gains:

• On the National Stock Exchange (NSE), Paytm's shares increased by 2.02%, closing at Rs 729.40 each. Intraday, the stock touched a low of Rs 683.55, down by 4.4%.
• On the Bombay Stock Exchange (BSE), the stock ended higher by 1.38%, settling at Rs 726.20 after hitting an intraday low of Rs 685.

Trading volumes were significant, with approximately 60.91 lakh shares changing hands on the NSE and around 5.17 lakh shares traded on the BSE.

Enforcement Directorate’s Allegations​

The Enforcement Directorate's notice, received by Paytm on February 28, 2025, pertains to alleged contraventions of FEMA regulations involving the company's investment transactions between 2015 and 2019. Specifically, the notice identifies Paytm and two subsidiaries—Little Internet Pvt Ltd (LIPL) and Nearbuy India Pvt Ltd (NIPL)—for violating rules in transactions totaling over Rs 611 crore.

As per Paytm’s disclosure:

• Transactions involving One97 Communications account for over Rs 245 crore.
• Alleged contraventions related to Little Internet Pvt Ltd amount to around Rs 345 crore.
• Transactions involving Nearbuy India Pvt Ltd are pegged at about Rs 21 crore.

Paytm clarified that some of these alleged violations occurred during periods when the companies in question were not under its ownership.

Paytm’s Response and Impact on Operations​

In a regulatory filing, Paytm assured stakeholders that it is actively addressing the issue, seeking legal counsel, and evaluating appropriate measures in line with regulatory requirements. The company emphasized that these proceedings have no impact on operational services provided to its customers and merchants.

Paytm affirmed that all services remain "fully operational and secure," reinforcing consumer and investor confidence despite the regulatory scrutiny.

Acquisition Background​

Paytm acquired Little Internet and Nearbuy (formerly Groupon India) in 2017. Initially founded by entrepreneur Ankur Warikoo as Groupon India in 2011, the management team acquired the business from Groupon in 2015, transforming it into an independent entity prior to Paytm’s acquisition.