Paytm CEO, CFO get SEBI notice over 2023 loan disclosure
What's the story
Paytm's senior management, including CEO Vijay Shekhar Sharma and CFO Madhur Deora, have received a show cause notice from the Securities and Exchange Board of India (SEBI). The notice pertains to the timing of Paytm's 2023 announcement regarding the curbing of small personal loans. It also questions whether this information was appropriately classified as unpublished price-sensitive information (UPSI). SEBI show-cause notices demand explanations for alleged violations, which can trigger fines or restrictions.
Company statement
No financial impact expected
In its BSE filing, Paytm said it doesn't expect any financial impact from the show cause notice.
The notice comes as Paytm's stock has been on a strong upward trajectory, gaining nearly 20% in the past month and around 24% year-to-date (YTD).
This is due to optimism over the government's possible merchant discount rate (MDR) on select UPI transactions and robust Q1 FY27 earnings.
Regulatory changes
Paytm scaled back distribution of small-ticket personal loans in 2023
On December 6, 2023, Paytm announced its decision to scale back the distribution of personal loans below ₹50,000.
This was in response to stricter consumer lending norms imposed by the Reserve Bank of India (RBI).
The announcement led to a sharp market reaction, with Paytm's shares falling some 20% in the next trading session.
Market impact
RBI tightened rules amid fears of spike in small-value loans
About three weeks before Paytm's announcement, the RBI had tightened personal loan rules by raising capital requirements amid fears of a spike in small-value loans.
Initially, Paytm shares fell some 1.9% after the RBI move but recovered in subsequent trading sessions.
However, in the eight days leading to Paytm's December 6 announcement, its shares fell some 12%.