‘Not new development’: Paytm clarifies on SEBI notice reports; shares up 2%

Market regulator SEBI (Securities Exchange Board of India) reportedly issued a show-cause notice to the founder of Paytm operator One97 Communications Ltd, Vijay Shekhar Sharma, and other board members related to its initial public offering (IPO) launch in November 2021.

The notice is not on the SEBI website, though Paytm confirmed the development via an exchange filing, saying it’s an 'old' development. "This is not a new development, as the company had already made relevant disclosures on this matter in its financial results for the quarter and year ended March 31, 2024, as well as the quarter ended June 30, 2024."

Paytm says it is in regular communication with SEBI and making necessary representations. "Accordingly, there is no impact on the financial results for previous quarters ended June 30, 2024, and March 31, 2024, respectively." The company's clarification points to two disclosures made in the past.

Sharma and others reportedly received notices for non-compliance with certain promoter norms, and based on the RBI's inputs following its adverse action against Paytm's former associate entity. The main issue revolves around Sharma's classification as an employee rather than a promoter, which would have made him ‘ineligible’ for ESOPs or employee stock options.

The company during the year ended March 31, 2022, granted 21,000,000 ESOPs to Paytm MD and CEO Sharma, which it said was subject to the achievement of 'specified' milestones. The company's previous disclosures say that based on an "independent legal opinion" obtained by the management, it believed the company was compliant with the "relevant regulations".

Shares of Paytm are trading up at ₹541.35 (at 9.40 am) today, up 2.13% from the last trading session. The stock opened a gap up and hit the day's high at ₹548.70 on the BSE, taking its m-cap to ₹34,425.22 crore. At the current share price, Paytm is trading 55% lower compared to a 52-week high of ₹998.30 touched on October 23, 2023.

Paytm has risen 26.72% in the past six months, while the scrip is up 9.57% in the past month. On a year-on-year basis, the shares are down 38.71%.

Paytm last week announced the sale of its movie and events ticketing business for ₹2,048 crore to food-tech platform Zomato. The acquisition of Paytm's movie and events ticketing businesses will allow Zomato to expand its presence in the 'going-out' segment, while Paytm says it'll focus on its core financial services.

The deal term says Paytm will transfer its ticketing businesses, TicketNew and Insider, along with 280 existing employees, to Zomato. These businesses, acquired by Paytm for ₹268 crore between 2017 and 2018, have recently reported a combined gross order value (GOV) of over ₹2,000 crore for FY24.

The Paytm parent's loss stood at ₹840 crore for the April-June quarter of FY2024-25, up from ₹357 crore in the year-ago period. Vijay Shekhar Sharma-led company's revenue declined 36% to ₹1,502 crore in Q1 FY25 against ₹2,342 crore in the year-ago period.