Sebi Issues Show-Cause Notice To Paytm's Vijay Shekhar Sharma Over IPO Violations

The Securities and Exchange Board of India (Sebi) has issued show-cause notices to Vijay Shekhar Sharma, founder of One 97 Communications Ltd (Paytm's parent company), and the board members who served during its November 2021 initial public offering (IPO).

These notices are related to alleged misrepresentation of facts, particularly concerning Sharma's non-compliance with promoter classification norms.

The Reserve Bank of India provided inputs for the investigation, according to reports.

One source familiar with the matter stated, "Sebi is taking the view that Sharma should have been classified as a promoter, and it was also the fiduciary duty of board members of the company to verify the accuracy of the claims made by the founder and attest the same."

The source further noted, "Although Sebi has gone after directors of a company in the past, they have been mostly cases of financial fraud. This is one of the rare cases where Sebi is trying to hold the directors responsible for a potential compliance lapse, which was also not pointed out either by bankers or statutory auditors."

Another insider highlighted a key concern: "A key issue in the case is that Sebi has initiated action three years after the listing. Sebi had known about the shareholding arrangement ever since the offer document was filed in 2021. In fact, subsequently, proxy advisory firms have also red-flagged the issue. However, Sebi initiated action only after the Paytm Payments Bank saga."