SEBI Issues Show Cause Notice To Paytm Over 2023 Disclosure

The Securities and Exchange Board of India (SEBI) has issued a show cause notice (SCN) to the key managerial personnel (KMP) of fintech major Paytm over alleged violations of disclosure norms.

In a filing with the exchanges, the fintech giant said that the notice, dated August 11, pertains to the timing of an announcement in December 2023. The company also said that the SCN questions the classification of the announcement as an unpublished price sensitive information.

“… We wish to inform you that the Company’s Key Managerial Personnel… have received a (an) SCN… from the Securities and Exchange Board of India (“SEBI”) regarding the timing of disclosure of certain information and its classification as unpublished price sensitive information, concerning the Company’s Corporate Announcement dated December 06, 2023,” read the filing. 

Paytm said that it is reviewing the notice and will respond to the markets regulator within the required two-week window. It also sees the matter as having no financial impact on the company’s business.  

The SEBI notice has asked Paytm’s executive(s) to explain the timing of its December 2023 disclosure, which shared an update on the company’s loan distribution business then. At the time, the fintech giant had said that it would scale down small-ticket loans of less than INR 50,000, which then predominantly comprised its postpaid loan business.

“… in line with its continued focus on driving a healthy portfolio, the company has recalibrated the portfolio origination of less than ₹50,000, which is prominently the postpaid loan product and will now be a smaller part of its loan distribution business going forward,” Paytm said then.

Following the announcement, Paytm plunged almost 19% on a single-day to a seven-month low on the BSE. Right after this, brokerage firms, including Goldman Sachs, Jefferies and JM Financial, cut their price target for Paytm. 

While there appears no clarity on what allegation is SEBI probing with regards to Paytm’s KMP, the market regulator, in simple terms, is likely probing whether the fintech major failed to disclose a material event on time and whether it properly assessed the market impact of the move.

The notice, which was also issued under the SEBI (Prohibition of Insider Trading) Regulations, 2015, will also potentially pave the way for a probe into whether Paytm properly identified an important piece of information, kept this information confidential and ensured adequate insider-trading controls in place.

The development comes at a time when Paytm shares are in rally mode. Buoyed by healthy Q1 FY27 results and the Centre mulling a potential MDR on select UPI transactions, the stock has soared more than 19.6% in the past month and is up 23.6% on a year-to-date (YTD) basis.

On the financial front, Paytm reported a 79% jump in consolidated net profit to ₹220 Cr in Q1 FY27 compared with ₹123 Cr in the year-ago quarter. Meanwhile, revenue from operations grew 28% YoY to ₹2,448 Cr during the quarter.

Shares of Paytm closed Wednesday’s trading session 0.16% lower at ₹1,605.5 on the BSE. 

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