Paytm Faces SEBI's Scrutiny Over Related Party Transactions with PPBL in FY22

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Introduction

In a recent development, One 97 Communications, the parent company of Paytm, has received an administrative warning from the Securities and Exchange Board of India (SEBI). The issue revolves around related party transactions conducted with Paytm Payments Bank (PPBL) during the fiscal year 2022, which lacked the necessary approvals from the audit committee and shareholders.

One 97 Communications, which is Paytm's parent firm, has got an 'administrative warning letter' from SEBI over related party transactions it had entered into with Paytm Payments Banks (PPBL) in FY22.
One 97 Communications, which is Paytm's parent firm, has got an 'administrative warning letter' from SEBI over related party transactions it had entered into with Paytm Payments Banks (PPBL) in FY22.


SEBI’s Examination and Findings

According to a letter from SEBI dated July 15, an examination was conducted regarding the disclosure of financial and other information by One 97 Communications and its associate, PPBL. The examination revealed non-compliances related to related party transactions (RPTs) between the company, its subsidiaries, and PPBL.

The SEBI letter highlighted that the company had engaged in excess RPTs with PPBL, amounting to Rs 324 crore for availing services from PPBL and Rs 36 crore for rendering services to PPBL, all without due approval. Despite the company’s claim that these transactions were communicated to shareholders, SEBI found that they should have been categorized as material RPTs and approved accordingly.

Company’s Response

In response to the findings, One 97 Communications reiterated its commitment to compliance with SEBI regulations. The company emphasized its dedication to upholding the highest compliance standards and stated that it would submit a detailed response to SEBI. The fintech firm assured that it has consistently acted in line with SEBI’s guidelines.

SEBI’s Warning and Recommendations

SEBI has taken the violations seriously, issuing a stern warning to Paytm. The regulatory body advised the company to enhance its compliance standards to prevent future occurrences of such non-compliances. SEBI also instructed the company to present its letter before the board in its upcoming meeting for information and necessary corrective actions. A report on the actions taken is to be submitted to SEBI within ten days of the board meeting.

Conclusion

This administrative warning serves as a crucial reminder for companies to maintain rigorous compliance with regulatory standards. Paytm’s commitment to rectifying these issues and demonstrating the highest compliance standards will be closely monitored by SEBI and stakeholders alike.



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