Paytm Shares Fall 9% as SEBI Notices Emerge: Company Clarifies Notices Were Not New

The stock price of One97 Communications, the parent company of Paytm, experienced a significant drop of 9% on Monday following a report about SEBI's (Securities and Exchange Board of India) show-cause notices issued to its founder-chairman, Vijay Shekhar Sharma, and board members from the company’s IPO in November 2021. The notices sought clarification on whether Sharma was considered a promoter and a large shareholder during the IPO, as per SEBI regulations which restrict promoters from receiving stock options.

After the report emerged late in the trading session, Paytm’s stock price on the Bombay Stock Exchange (BSE) fell from approximately Rs 555 to Rs 505, marking a 9% decrease. The stock partially recovered to close at Rs 530, reflecting a decline of over 4% for the day. The trading volume surged to 14.2 lakh shares, double the average of 7.8 lakh shares over the past two weeks.

Following the market reaction, Paytm clarified that the SEBI notices were not new. The company stated that these notices had already been disclosed in its financial results for the fiscal year ending March 31, 2024, and the June 2024 quarter. Paytm reassured investors that there would be no impact on its financial results for these periods. The company emphasized its ongoing communication with SEBI and the necessary representations made regarding this matter.

The company also pointed out that the notices had been previously mentioned in its FY24 annual report and quarterly financial results. According to the company, the management had sought an independent legal opinion and believed it was in compliance with relevant regulations. The company’s auditors had reviewed and confirmed this compliance in their reports.

Earlier this year, Paytm Payments Bank, a subsidiary of One97 Communications, faced a ban from the Reserve Bank of India (RBI) on offering incremental banking services. This regulatory action caused Paytm's stock price to more than halve from its previous level of Rs 761 on January 29, 2024. Currently, the stock is trading at a quarter of its IPO price of Rs 2,150.

The market response underscores the sensitivity of investor sentiment to regulatory issues and disclosures. The stock's volatile performance highlights ongoing concerns among investors regarding regulatory compliance and its impact on Paytm’s financial stability and market position.