SEBI sends show-cause notice to Paytm founder: Alleged misrepresentation at IPO, notice to board members too

Market regulator Securities Exchange Board of India (SEBI) has issued a show-cause notice to Paytm founder Vijay Shekhar Sharma and board members involved during the November 2021 IPO offer. This notice relates to allegations of misrepresentation of facts during the IPO. Shares of Paytm's parent company One97 Communications Limited were listed in November 2021. Moneycontrol has given this information citing people in one of its reports. SEBI has initiated this investigation based on information from the Reserve Bank of India (RBI). According to the report, people with knowledge of the matter said that the RBI had investigated Paytm Payments Bank earlier this year. Paytm shares down nearly 5% Shares of Paytm's parent company One97 Communications Limited are down over 4% today. Its shares have given a negative return of 8.59% in the last 5 days, 40.06% in 1 year and 18.10% so far this year. However, its stock has seen an increase of 3.95% in the last 1 month and 23.60% in the last 6 months. Sebi had earlier issued a show cause notice to the directors, people involved in the matter said Vijay Shekhar Sharma had management control of the company when the documents for the IPO were sent and was not an employee. Hence SEBI also issued a show cause notice to those directors of the company at that time. who supported Vijay Shekhar Sharma's stand. After the listing of shares, Sharma became ineligible for Employee Stock Option (ESOp) as promoters do not get ESOp after IPO, as per SEBI rules. Directors did not do their job properly After the listing of the shares, Sharma became ineligible for Employee Stock Option (ESOp) because as per SEBI rules, promoters do not get ESOp after IPO. SEBI has already taken action against the directors of the company. Then these cases were related to financial malpractice, but the recent case is quite rare. While SEBI is accusing the directors of not doing their job properly. Also the attention of merchant bankers and auditors was not drawn to this. Sharma transferred the stake before filing the IPO documents, according to the report, unless a company classifies itself as professionally managed, a listed company is presumed to be run by the promoters. A company is considered professionally managed only when no shareholder owns more than 10%. Also no single shareholder should have controlling right. If we look at the case of Paytm, before filing the documents for the IPO, Vijay Shekhar Sharma transferred his 5% stake to a family trust Vss Holdings. Earlier, Shekhar Sharma's stake in One97 Communications was 14.6%, which was reduced to 9.6%. According to the rules, Shekhar Sharma's share was reduced to 10%. This is nothing new, Paytm said in an exchange filing. The matter has been discussed. 2024. The explanation has already been made. The company is in regular touch with SEBI.

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