SEBI Rebukes Paytm for Related Party Transactions with PPBL in FY22
According to the fintech company, it is also “committed to upholding and demonstrating the highest compliance standards and shall submit its response to SEBI.”
The parent company of Paytm, One 97 Communications, received a “administrative warning letter” from SEBI for related party transactions it made with Paytm Payments Banks (PPBL) in FY22 without the required consent from the audit committee or the shareholders.
The company stated that it has continuously complied with SEBI regulations in a BSE filing.
The fintech company went on to state that it will “submit its response to SEBI and is committed to upholding and demonstrating the highest compliance standards.” In a letter dated July 15, the Securities and Exchange Board of India (SEBI) stated that it has carried out an investigation over the disclosure of financial and other data pertaining to One 97 Communications and its affiliated Paytm Payments Bank Limited (PPBL).
In this instance, during the assessment, the following non-compliances were noted:The firm and/or its subsidiaries entered into excess related party transactions (RPTs) with PPBL during the fiscal year 2021–2022 without the proper consent of the shareholders or the audit committee, as stated in the SEBI letter.
Paytm disclosed the details of the SEBI letter in a filing to the BSE.
In response to the markets regulator’s letter, the company stated that it had given shareholders access to a cumulative numerical value of all of its and its subsidiaries’ transactions with PPBL and that any transactions involving OCL subsidiaries and PPBL do not qualify as RPTs for the FY 2021–2022.
Conversely, SEBI stated that the Board and Audit Committee of the business had deemed transactions involving OCL and/or its subsidiaries and PPBL as material RPTs and had resolved that RPTs with PPBL would be limited to the amounts specified in the corresponding resolutions.
The excess RPTs (between OCL and its subsidiaries and PPBL) that were not approved were tallied in the SEBI letter at Rs 36 crore for OCL’s service provision to PPBL and Rs 324 crore for OCL’s use of PPBL’s services.
According to SEBI, the infractions are taken extremely “seriously.”
In order to prevent similar incidents from happening again, SEBI said, “you are, therefore, warned to be careful in the future and improve your compliance standards; failing which, appropriate enforcement action would be initiated in accordance with the law.”
In order to obtain information and take any necessary corrective action, the markets regulator also recommended that the company present its letter to the board during the meeting. “Post which action taken report shall be submitted to SEBI within 10 days thereafter.”
