Shares of One 97 Communications (Paytm) are set to face increased scrutiny on Monday after the company refuted a report suggesting that the government was inspecting Chinese investments in Paytm Payments Services Ltd (PPSL). The financial technology giant has been under the spotlight following a rejection of its payment bank license application in 2020 and recent changes in ownership structure.
In 2020, Paytm applied for a license under the guidelines regulating payment aggregators and gateways. However, the Reserve Bank of India (RBI) rejected the application, instructing the company to resubmit while complying with Press Note 3 under Foreign Direct Investment (FDI) rules. Subsequently, Paytm Payments Bank submitted the required application on December 14, 2022, after a downward investment from One97 Communications Ltd (OCL) into the company as per FDI guidelines.
Contrary to the report’s claims, Paytm clarified that the ownership structure has since changed, with the founder remaining the largest stakeholder in the company. Ant Financial reduced its stake in OCL to less than 10% in July 2023, disqualifying it for beneficial company ownership. The founding promoter of One 97 Communications Ltd now holds a 24.3% stake.
Despite the clarification, Paytm shares experienced a 6.09% decline on Friday and a 10% drop on Thursday, contributing to a year-to-date decrease of 35%.
In response to the ongoing situation, the Paytm board announced the formation of a group advisory committee chaired by former SEBI Chairman M Damodaran. The committee, which includes professionals like M.M. Chitale and R Ramachandran, aims to collaborate with the board in strengthening compliance and regulatory matters.
“The Group Advisory Committee will work closely with the Board, inducting additional members as necessary. Mr. Meleveetil Damodaran, IAS (Retd.), will serve as the Chairperson, bringing extensive experience in corporate governance, restructuring, and regulatory leadership,” Paytm stated.
As the investigation unfolds, Paytm strives to maintain transparency and regulatory compliance amidst challenges to its market position.
