The fintech giant, One97 Communications Limited (OCL), revealed that while the notice does not specify the financial impact, it points to violations amounting to over Rs 611 crore.
NEW DELHI (India CSR): The Enforcement Directorate (ED) has issued a show cause notice to One97 Communications, the parent company of Paytm, over alleged violations of the Foreign Exchange Management Act (FEMA). The notice also includes Paytm’s two subsidiaries, Little Internet Private Limited (LIPL) and Nearbuy India Private Limited (NIPL), regarding certain investment transactions.
The ED’s action comes after alleged contraventions related to investment transactions between 2015 and 2019. The company made this disclosure in an exchange filing on February 28, 2025.
Paytm’s Response: Alleged Violations Pre-Date Its Ownership
In its statement, Paytm clarified that the alleged FEMA breaches relate to a period before it acquired these subsidiaries.
“We hereby inform you that a show cause notice…has been received by the Company on February 28, 2025…from the Directorate of Enforcement. This is in relation to alleged contraventions for the years 2015 to 2019 of certain provisions of the ‘FEMA’ by the Company, in relation to its acquisition of two subsidiaries, namely Little Internet Private Limited (“LIPL”) and Nearbuy India Private Limited (“NIPL”) erstwhile Groupon, along with certain Directors and Officers,” the filing stated.
The fintech giant, One97 Communications Limited (OCL), revealed that while the notice does not specify the financial impact, it points to violations amounting to over Rs 611 crore.
Breakdown of Alleged Transactions
According to Paytm’s disclosure, the breakdown of the alleged contraventions is as follows:
- One97 Communications (OCL) transactions: Rs 245 crore
- Little Internet Private Limited (LIPL) transactions: Rs 345 crore
- Nearbuy India Private Limited (NIPL) transactions: Rs 21 crore
The company emphasized that some of these alleged violations are linked to transactions carried out before it acquired the subsidiaries.
“Certain alleged contraventions attributable to two acquired companies – Little Internet Private Limited and NearBuy India Private Limited – pertain to a period when these were not subsidiaries of the Company,” Paytm stated in its filing.
No Impact on Paytm’s Operations
Despite the ED notice, Paytm assured its consumers and merchants that its services remain unaffected. The company stated that it is fully operational and secure.
“The matter is being addressed with a focus on resolving it in accordance with applicable laws. There is no impact of this matter on Paytm’s services to its consumers and merchants. All services are fully operational and secure, as always,” the company said.
Legal Consultation Underway
Paytm has engaged legal advisors to navigate the regulatory process and resolve the matter. The company reiterated its commitment to compliance and due process.
“To resolve the matter in accordance with applicable laws and regulatory processes, the Company is seeking necessary legal advice and evaluating appropriate remedies,” the company said in its statement.
Background of the Acquisition
Paytm had acquired Little Internet Private Limited and Nearbuy India Private Limited in 2017. Nearbuy was initially known as Groupon India. The Groupon India business was started by Ankur Warikoo in 2011. In 2015, Warikoo and the core management team bought the India business from Groupon, making it an independent entity.
This acquisition was part of Paytm’s strategy to expand its presence in the e-commerce and digital services space. However, the ED’s notice suggests that certain transactions linked to these companies before the acquisition may have breached FEMA regulations.
Regulatory Challenges Continue for Paytm
This is not the first time Paytm has faced regulatory scrutiny. The fintech giant has been under the lens for various compliance-related matters. The latest ED notice adds to the ongoing regulatory hurdles faced by the company.
Paytm is expected to respond to the show cause notice and present its case before the authorities. With legal proceedings now underway, the outcome of this case will be closely watched by industry observers and stakeholders.
For now, Paytm maintains that it is taking all necessary steps to address the issue while ensuring that its business operations remain unaffected.
(India CSR)
