Winning Bizness Desk
Mumbai.The Enforcement Directorate (ED) has accused Paytm’s parent company, One 97 Communications Limited (OCL), and its subsidiaries of violating foreign investment regulations. In a statement on Monday, ED stated that OCL did not inform the Reserve Bank of India (RBI) about foreign investments made in Singapore.
Additionally, the company failed to report the establishment of a foreign step-down subsidiary to RBI. The ED also found that OCL’s subsidiary, Little Internet Private Limited, received foreign investments without complying with RBI guidelines. Furthermore, another subsidiary, Nearby India Private Limited, did not report foreign investments to RBI within the required time frame.
Show-Cause Notice Issued on Saturday
Paytm received a show-cause notice from ED for violations under the Foreign Exchange Management Act (FEMA). The case involves transactions worth ₹611 crore between 2015 and 2019. Out of this, ₹345 crore was related to Little Internet Private Limited, while ₹21 crore was linked to Nearby India Private Limited. The remaining amount involved transactions related to One 97 Communications Limited.
Paytm had acquired both subsidiaries in 2017, but the alleged violations occurred before the acquisitions. The company has stated that it is working on resolving the issue.
Paytm Says Services Unaffected
Paytm confirmed that it received the notice on February 28, 2025 and clarified that these violations took place before the subsidiaries became part of One 97 Communications. The company assured its users and stakeholders that its services remain unaffected, and it is actively addressing the matter.
Despite these regulatory challenges, Paytm’s stock has shown significant growth in the past year. However, after the news of the ED notice, its share price might be impacted on Monday. On Friday, the stock closed at ₹714, down by 1.59%. Over the past year, the stock has surged 70%, but it has seen a 27% decline this year.
Paytm Reports ₹208 Crore Loss in Q3FY25
In its third-quarter earnings report (October-December FY25), Paytm’s parent company, One 97 Communications, reported a net loss of ₹208 crore. This was a slight improvement from the ₹220 crore loss in the same quarter last year.
During this quarter, the company’s revenue dropped 36%, falling to ₹1,828 crore from ₹2,850 crore in the same period last year (Q3FY24). This decline in revenue comes amid growing regulatory scrutiny and operational challenges.
FEMA Act Introduced in 1999
The Foreign Exchange Management Act (FEMA) was introduced in 1999, replacing the older Foreign Exchange Regulation Act (FERA). The primary aim of FEMA is to facilitate external trade and payments, ensuring compliance with foreign exchange laws in India.
Under FEMA, the Enforcement Directorate (ED) is responsible for investigating violations, taking action against offenders, and imposing penalties. The recent action against Paytm highlights the strict regulatory environment governing foreign investments in India.
