New Delhi, Mar 3: Shares of One97 Communications, the parent company of Paytm, dropped sharply by more than 4% on Monday, following a notice from the Enforcement Directorate (ED) regarding the alleged violation of Foreign Exchange Management Act (FEMA) rules. The company faces scrutiny over certain investment transactions involving One97 Communications and its two subsidiaries, Little Internet Pvt Ltd (LIPL) and Nearbuy India Pvt Ltd (NIPL).
On the National Stock Exchange (NSE), One97 Communications’ stock plunged 4.39%, closing at Rs 683.55 per share. On the Bombay Stock Exchange (BSE), the stock fell by 4.37%, reaching Rs 685 per share.
The broader market also saw a decline, with the BSE Sensex dropping by 271.22 points, or 0.37%, to stand at 72,926.88 in late morning trading. Similarly, the NSE Nifty lost 93.60 points, or 0.42%, closing at 22,031.10.
ED Issues Notice for Alleged FEMA Violations
In a regulatory filing issued on Saturday, Paytm revealed that it had received a notice from the Enforcement Directorate for alleged violations of FEMA regulations. The notice pertains to investment transactions related to One97 Communications, along with its subsidiaries, Little Internet and Nearbuy, which were acquired in 2017.The Enforcement Directorate’s notice indicates potential violations during the period 2015-2019, specifically concerning the acquisition of the two subsidiaries. However, Paytm clarified that the alleged contraventions refer to the period before these companies became part of One97 Communications, and therefore were not subsidiaries at the time of the transactions in question.
Details of the Alleged Breach
The ED’s notice highlights an aggregate amount of over Rs 611 crore across the three entities. According to Paytm, the breakdown of the alleged violations is as follows:- One97 Communications: Rs 245 crore
- Little Internet Pvt Ltd (LIPL): Rs 345 crore
- Nearbuy India Pvt Ltd (NIPL): Rs 21 crore
Paytm's Response and Reassurance
Paytm reassured its investors and customers that the matter would be addressed in line with applicable laws and regulatory processes. The company stressed that this issue does not affect its day-to-day operations, stating that all services are fully functional and secure, as always."We are seeking necessary legal advice and evaluating appropriate remedies to resolve the matter in accordance with applicable laws and regulatory processes," the company said in its filing.
Background of the Companies Involved
Nearbuy India Pvt Ltd, formerly Groupon India, was founded by Ankur Warikoo in 2011. The company’s India business was initially part of the global Groupon network. In 2015, Warikoo and the core management team of Groupon India purchased the Indian arm and turned it into an independent entity, which later merged with Paytm’s services.As the legal proceedings unfold, investors and stakeholders are closely watching how the company navigates the regulatory challenges.
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