SEBI’s Concerns and Paytm’s Response
Paytm’s parent company, One 97 Communications, has received an administrative warning from the Securities and Exchange Board of India (SEBI) regarding related party transactions with Paytm Payments Bank for the fiscal year 2022 (FY22). SEBI’s primary concern is the lack of approval from both the audit committee and shareholders for these transactions. In response, Paytm has asserted its adherence to listing regulations and has committed to addressing SEBI’s concerns with a detailed response.
Details of the Transactions Under Scrutiny
SEBI’s warning centers on related party transactions amounting to ₹324 crore and ₹36 crore conducted during FY21-22. The regulatory body pointed out that these transactions were not approved by the necessary governance bodies, highlighting a lapse in compliance with SEBI regulations.
SEBI’s Observations and Paytm’s Stand
In its letter, SEBI noted, “On one hand, the company claimed that it had provided a cumulative numerical value of the transactions undertaken with Paytm Payments Bank by the Company and its subsidiaries for reference by the shareholders, and that transactions between subsidiaries of OCL and PPBL do not qualify as related party transactions during the FY 2021-22.” However, SEBI added that the company’s Board and Audit Committee had deemed these transactions as material related party transactions and had passed resolutions to manage them within set limits.
Paytm’s Commitment to Compliance
Paytm has maintained that it has consistently complied with Regulation 23, read with Regulation 4(1)(h) of the SEBI Listing Regulations, including all amendments and updates over time. The company stated, “The Company believes it has consistently acted in compliance with the relevant regulations. We are committed to upholding and demonstrating the highest compliance standards and will submit our response to SEBI accordingly.”
Reassurance to Stakeholders
Paytm also reassured stakeholders that the warning has no impact on the financial, operational, or other activities of the company. The company reiterated its commitment to regulatory compliance and transparency. This development comes as a reminder of the stringent regulatory environment in which financial entities operate. SEBI’s scrutiny emphasizes the importance of rigorous governance practices, especially in related party transactions, to ensure transparency and protect shareholder interests.
Future Outlook and Governance Practices
The warning from SEBI could have implications for how Paytm and similar companies manage their governance structures and related party transactions in the future. It underscores the necessity for robust internal controls and the proactive involvement of audit committees and shareholders in approving significant transactions. As Paytm prepares its detailed response to SEBI, the outcome of this issue will be closely watched by market participants and regulatory bodies. It serves as a critical test of Paytm’s governance framework and its commitment to adhering to regulatory standards.
In conclusion, Paytm’s receipt of an administrative warning from SEBI regarding related party transactions with Paytm Payments Bank has brought to light the challenges and responsibilities associated with maintaining regulatory compliance. Paytm’s proactive stance in addressing SEBI’s concerns and its reaffirmation of adherence to listing regulations highlight its commitment to transparency and governance. The company aims to resolve this matter swiftly, ensuring that it continues to operate within the bounds of regulatory expectations.
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