Market regulator Sebi issues show-cause notice to Paytm on ESOPs

The Noida-based company said the show-cause notice did not have any impact on the financial results of the fourth quarter of the financial year 2024 (Q4 FY24) and Q1 FY25

Capital markets regulator Securities and Exchange Board of India (Sebi) has issued a show-cause notice to Paytm, questioning the fintech major’s move to grant 21 million Employee Stock Options (ESOPs) to its founder and CEO Vijay Shekhar Sharma in financial year 2021-22 (FY22).

Paytm, in an exchange filing on Friday, said, “During the previous quarter, the company had received a show cause notice from Sebi related to the above options regarding compliance with SEBI SBEB Regulations. The company has submitted its preliminary response and is in the process of seeking further information from SEBI in this regard.”

The stock options were tied to specific milestones of the firm.

The Noida-based company, however, said the notice did not have any impact on the financial results of the fourth quarter of financial year 2024 (Q4FY24) and Q1FY25. 

The development comes a few days after the company received an administrative warning from the markets regulator with regard to related-party transactions. 

The firm and its subsidiaries processed two transactions -- service taken by OCL (One97 Communications) from Paytm Payments Bank and service to the bank from the company in 2021-22 (FY22) -- allegedly without approval from its shareholders or the audit committee.

The amounts in the two transactions have been estimated at Rs 324 crore and Rs 36 crore, respectively. 

In response to the warning, Paytm had stated that it has “consistently acted in compliance’. 

“The company is committed to upholding and demonstrating the highest compliance standards and shall also submit its response to Sebi. There is no impact on financial, operation or other activities of the company pursuant to the above mentioned letter,” the firm said in a statement.