Paytm gets show cause notice from ED over alleged Fema violations

One 97 Communications (OCL), which runs the digital payments application Paytm, has received a show cause notice from the Directorate of Enforcement (ED) over alleged violations of foreign exchange rules involving Rs 611 crore at the company and two of its subsidiaries.

The notice dated February 27 was related to alleged contraventions of certain provisions of the Foreign Exchange Management Act (Fema), the company said in a filing with the BSE Saturday.

The company said it received the notice Friday evening. Its shares closed Friday at Rs 716, down 1.3%, on the BSE.

The ED has identified non-compliance involving Rs 245 crore in OCL, Rs 345 crore in Little Internet and Rs 20.9 crore in Nearbuy India, the company said. The alleged contraventions were linked to certain investment transactions in these companies, it said.

OCL said it is seeking legal advice and taking appropriate steps to “resolve the matter in accordance with applicable laws and regulatory processes”.

The Noida-headquartered firm said the compliance issues in the subsidiaries were from a time when they were not acquired by Paytm.

Paytm acquired hyper local deals platforms Little Internet and Nearbuy in 2017 and merged the two brands. Little Internet was funded by Tiger Global Management and Elevation Capital. It had raised around $50 million in equity funding. Nearbuy, cofounded by Ankur Warikoo, was backed by Peak XV Partners (then Sequoia India) and had raised around $22 million in equity funding.This issue comes within weeks of the company settling a case with regards to certain regulatory violations with the Securities and Exchange Board of India for Rs 45 lakh.

The fintech platform saw its associate entity Paytm Payments Bank facing regulatory action from the Reserve Bank of India early last year.