One 97 Communications, the parent company of Paytm, has been issued an administrative warning by the Securities and Exchange Board of India (SEBI) concerning transactions carried out in the financial year 2021-22. SEBI’s communication highlighted that Paytm conducted related party transactions (RPTs) with Paytm Payments Bank Limited (PPBL) without obtaining required approvals from its audit committee or shareholders.
The transactions in question involved sums of ₹324 crore and ₹36 crore. These transactions, executed among One 97 Communications, its subsidiaries, and PPBL, were conducted without formal approvals. SEBI’s investigation identified non-compliance by the company with Regulation 23, in conjunction with Regulation 4(1)(h) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
Regulation 23 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 outlines the guidelines and procedures that listed companies must adhere to when engaging in related party transactions (RPTs). According to this regulation, all RPTs must receive prior approval from the audit committee, and transactions deemed material require approval through a resolution by shareholders.
A related party transaction is categorized as material if its total value exceeds 10% of the company’s annual consolidated turnover. Such transactions must be disclosed in the company’s annual report, and material transactions need to be reported to stock exchanges on a quarterly basis. Additionally, listed entities are mandated to establish and maintain a policy governing the materiality of RPTs and the management of these transactions, which must undergo periodic review and approval by the board.
SEBI’s communication highlighted that Paytm reported a cumulative numerical value of transactions conducted with PPBL by the company and its subsidiaries for shareholder reference. However, the company’s board and audit committee categorized these transactions as material related party transactions (RPTs) and passed corresponding resolutions. This discrepancy between Paytm’s disclosure and the board’s classification of the transactions as material RPTs raised concerns.
SEBI’s communication also emphasized the seriousness of these violations and urged Paytm to enhance its compliance standards to prevent future occurrences. SEBI cautioned that failure to do so could lead to appropriate enforcement actions under the applicable regulations.
Additionally, SEBI directed Paytm to present the communication to its board of directors for corrective measures and to submit a report on the actions taken within 10 days.
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