Paytm Gets Show Cause Notice from ED for Violating FEMA in Acquisition Deals

Paytm, operated by One97 Communications (OCL), has received a show cause notice from the Enforcement Directorate (ED) for alleged violations of the Foreign Exchange Management Act (FEMA). The notice involves transactions worth over ₹611 crore related to the acquisition of its subsidiaries, Little Internet Private Limited (LIPL) and Nearbuy India Private Limited (NIPL), between 2015 and 2019.

The alleged violations pertain to investment transactions involving ₹245 crore in OCL, ₹345 crore in LIPL, and ₹20.9 crore in NIPL. Paytm has stated that these compliance issues occurred before the subsidiaries were acquired by the company.

The notice has been issued to One97 Communications Limited, two of its acquired subsidiaries, LIPL and NIPL, and certain current and past Directors and officers of the company and its two subsidiaries, the Paytm's regulatory filing stated.

In the exchange filing, Paytm said,"Pursuant to Regulation 30 read with Schedule III of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 , we hereby inform that a show cause notice dated February 27, 2025 has been received by the Company on February 28, 2025 at 19.27 Hrs. from the Directorate of Enforcement, Government of India. This is in relation to alleged contraventions for the years 2015 to 2019 of certain provisions of the Foreign Exchange Management Act, 1999 (“FEMA”) by the Company, in relation to its acquisition of two subsidiaries namely Little Internet Private Limited (“LIPL”) and Nearbuy India Private Limited (“NIPL”) erstwhile Groupon, along with certain Directors & Officers."

"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 said.

Paytm said in a comment,

We are working towards resolving the notice in accordance with applicable laws and regulatory processes. The alleged FEMA contraventions are related to two acquired subsidiaries - Little and Nearbuy - with certain transactions from before they became part of Paytm.

There is no impact on Paytm's services, which continue to be fully operational and secure.

We remain committed to transparency and governance in all our business practices.

This development follows recent regulatory actions against Paytm, including a case settled with the Securities and Exchange Board of India (SEBI) and regulatory action from the Reserve Bank of India (RBI) against Paytm Payments Bank.