Why One 97 Communications, parent of Paytm, shares lost 4% in trade today?

One 97 Communications, parent of Paytm, shares slipped 4.3 per cent in trade on BSE, logging an intraday low at Rs 685 per share. The selling pressure in the stock came after the company received a show cause notice from the Enforcement Directorate (ED).

 

The company has allegedly violated the Foreign Exchange Management Act (Fema) involving aggregate transactions worth over Rs 611 crore related to the acquisition of its subsidiaries. Further, the violations pertain to the company’s acquisition of two subsidiaries—Little Internet Private Limited (LIPL) and Nearbuy India Private Limited (NIPL), formerly Groupon—including certain directors and officers.

 

Around 9:59 AM, Paytm shares were down 1.79 per cent at Rs 703.5 per share on BSE. In comparison, the BSE Sensex was down 0.31 per cent at 72,969.22. The market capitalisation of the company stood at Rs 44,859.91 crore. The 52-week high of the stock was at Rs 1,063 per share and the 52-week low was at Rs 310 per share.

 

"The allegations against the company are regarding compliance to FEMA regulations in relation to its investments in Little Internet Private Limited and NearBuy India Private Limited. Certain alleged contraventions attributable to two acquired companies - Little Internet Private Limited and NearBuy India Private Limited - pertain to a period when these were not subsidiaries of the company," the filing read.

 

The filing further read that the company is seeking necessary legal advice and evaluating appropriate remedies.Besides, as per Paytm these violations occurred when these companies were not subsidiaries of One 97 Communications. 

 

Of the total Rs 611 crore, about Rs 345 crore relates to investment transactions involving Little Internet Private, while Rs 21 crore relates to NearBuy India. The remaining amount pertains to One 97 Communications, according to an exchange filing.

 

The company believes the development has no impact on services to consumers and merchants, which remain fully operational. In 2017, Paytm merged with Nearbuy.com and Little Internet, becoming the majority shareholder of the merged entity. In 2024, Paytm refused any instances of investigation or violation of foreign exchange rules by itself or its associate, Paytm Payments Bank Limited.

 

In the past one year, Paytm shares have gained 71 per cent against Sensex's decline of 0.91 per cent.