Paytm Faces ED Notice Over Alleged FEMA Violations
Paytm, the parent company of One97 Communications, is under scrutiny following a notice from the Enforcement Directorate (ED) regarding alleged violations of the Foreign Exchange Management Act (FEMA). The notice pertains to investment transactions involving its subsidiaries, Little Internet and Nearbuy, which reportedly occurred before these companies were acquired by Paytm. Following the announcement, Paytm’s shares experienced a brief decline of approximately 4% before stabilizing.
Details of the Allegations
The Enforcement Directorate issued a show-cause notice to Paytm on February 28, 2025, citing alleged contraventions of FEMA regulations from 2015 to 2019. The notice specifically relates to the company’s acquisition of Little Internet Pvt Ltd (LIPL) and Nearbuy India Pvt Ltd (NIPL), which was previously part of Groupon. According to Paytm’s regulatory filing, the alleged violations involve transactions exceeding Rs 611 crore, although the financial impact remains unspecified.
The breakdown of the alleged violations includes transactions involving OCL amounting to over Rs 245 crore, LIPL’s transactions of approximately Rs 345 crore, and NIPL’s transactions totaling about Rs 21 crore. Paytm clarified that these alleged contraventions occurred during a period when Little Internet and Nearbuy were not subsidiaries of the company.
Paytm’s Response to the Notice
In response to the ED’s notice, Paytm has assured stakeholders that it is taking the matter seriously and is seeking legal counsel to address the situation. The company emphasized that its operations remain unaffected, and services for both consumers and merchants continue as usual. Paytm’s statement highlighted its commitment to resolving the issue in compliance with applicable laws and regulatory processes.
The company acquired Little Internet and Nearbuy in 2017, and both firms have been integral to Paytm’s expansion strategy in the digital marketplace. Paytm’s proactive approach in addressing the ED’s concerns reflects its intent to maintain transparency and uphold regulatory standards.
Background on the Subsidiaries
Little Internet and Nearbuy have played significant roles in the Indian e-commerce landscape. Nearbuy, founded by Ankur Warikoo in 2011, was initially part of Groupon before becoming an independent entity in 2015. The acquisition of these companies has allowed Paytm to diversify its offerings and enhance its competitive edge in the market.
As the situation unfolds, investors and stakeholders will be closely monitoring Paytm’s actions and the potential implications of the ED’s notice on the company’s future operations and market performance.
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