Shares of One97 Communications, the parent company of fintech giant Paytm, tumbled more than 4% on Monday following news that the Enforcement Directorate (ED) had issued a show-cause notice to the firm for alleged violations of the Foreign Exchange Management Act (FEMA). The notice, linked to investment transactions involving Paytm and its subsidiaries Little Internet Pvt Ltd (LIPL) and Nearbuy India Pvt Ltd (NIPL), has reignited concerns about the company’s regulatory challenges.
On the National Stock Exchange (NSE), Paytm’s stock fell 4.39% to Rs 683.55 per share, while on the BSE, it declined 4.37% to Rs 685. The plunge came amid a broader market downturn, with the BSE Sensex dropping 271.22 points (0.37%) to 72,926.88 and the NSE Nifty slipping 93.60 points (0.42%) to 22,031.10 by late morning trade.The shares stabilised at Rs 705.20 (down 1.36%).
The ED’s notice, received by Paytm on February 28, 2025, and dated February 27, pertains to alleged FEMA breaches between 2015 and 2019 tied to the acquisition of LIPL and NIPL. According to a regulatory filing, the transactions under scrutiny total over Rs 611 crore, with Rs 245 crore attributed to One97 Communications, Rs 345 crore to Little Internet, and Rs 21 crore to Nearbuy India. Paytm has emphasized that some of these alleged violations occurred before it acquired the two subsidiaries in 2017, distancing itself from full accountability.
Little Internet and Nearbuy, both deal-discovery platforms, were merged under Paytm’s umbrella in 2017 as part of its push into offline commerce. Nearbuy, originally Groupon India, was founded by Ankur Warikoo in 2011 before becoming an independent entity in 2015 under his leadership. The ED’s scrutiny appears to focus on investment dealings during this pre-acquisition phase, raising questions about compliance oversight during that period.
Paytm has sought to reassure investors, stating that it is addressing the matter with legal counsel and that its services remain unaffected. “We are working to resolve the notice in accordance with applicable laws and regulatory processes,” the company said in a statement. “Paytm’s services to consumers and merchants remain fully operational and secure.”
The stock drop reflects investor unease as Paytm navigates yet another regulatory hurdle. The fintech firm has faced repeated setbacks, including a Reserve Bank of India (RBI) clampdown on its Payments Bank in 2024 over compliance issues. While Paytm has denied past ED probes into foreign exchange violations, the latest notice adds to a narrative of persistent regulatory friction, potentially undermining confidence in its growth trajectory.