Paytm shares fell Monday on news that India's markets watchdog has sent its founder notices over alleged misrepresentation, a move the fintech pioneer said was not a 'new development.'
The stock dropped as much as 8.9 per cent, the most since February, after Moneycontrol reported that the Securities and Exchange Board of India issued a so-called show cause notice to founder Vijay Shekhar Sharma and some board members who served when the company was going public. The regulator was looking into whether Paytm classified Sharma as an employee rather than founder during the initial public offer 2 1/2 years ago, making him eligible for stock options, Moneycontrol said, citing people it didn't identify.
Paytm previously disclosed that it granted 21 million employee stock options to Chief Executive Officer Sharma during the year ended March 31, 2022, during which the IPO took place. In the quarter to March 2024, the fintech received a show cause notice from SEBI related to Sharma's ESOPs and their compliance with regulations.
Paytm has already "made relevant disclosures on this matter in its financial results for the quarter and year ended March 31, 2024, as well as the quarter ended June 30, 2024," the company said in a public disclosure after market hours. It is in regular touch with the SEBI, and is making representations in the matter, the filing said.
Representatives of Sebi didn't respond to requests for comment.
Any new regulatory scrutiny will add to Paytm's headaches as the company is still coping with actions taken by the Reserve Bank of India earlier this year. The stock has plunged about 30 per cent since an RBI order hit its banking affiliate, and charismatic founder Sharma has been working to rebuild the business around digital payments and distribution of financial services like loans and cashbacks.
Last week, Paytm agreed to sell its movie and events ticketing business to Zomato Ltd. for $244 million in cash to focus on its core businesses.
Sharma pioneered fintech in India with Paytm mobile wallets, and then QR codes. His company, once India's most valuable startup, won the backing of some of the word's biggest business executives including Alibaba Group Holding Ltd. founder Jack Ma, SoftBank Group Corp. boss Masayoshi Son and Berkshire Hathaway Inc. Chairman Warren Buffett. A disastrous capital markets debut in 2021 was perhaps Sharma's first public speed bump, one from which Paytm is yet to recover "- the stock is still down about 75% from its listing price.
Paytm competes with Walmart Inc.'s PhonePe, Alphabet Inc.'s Google and billionaire Mukesh Ambani's Jio Financial Services Ltd. in India's crowded digital payments space.
Paytm stock recovered some losses to close 4.4 per cent lower in Mumbai.
