New Delhi: The Securities Exchange Board of India (SEBI) has issued a show-cause notice to Vijay Shekhar Sharma, the founder of Paytms parent company, One97 Communications Limited, and the board members at the time of the companys Initial Public Offering (IPO). According to a report by Money Control, the notice is linked to allegations of presenting inaccurate information during the IPO process, which took place in November 2021. Following the news, Paytms shares experienced a significant drop, falling by 9% compared to Fridays closing price.What is core issueThe notice revolves around allegations that Paytm did not adhere to the promoter classification rules during its IPO. This investigation was initiated based on inputs received from the Reserve Bank of India (RBI), which had earlier taken strict action against Paytm Payments Bank after its own investigation. The core question in SEBIs notice is whether Vijay Shekhar Sharma should have been presented as a promoter during the IPO process, given that he had managerial control over the company, not just a regular employee role.Details of SEBIs noticeSEBIs notice has raised concerns about the role of Vijay Shekhar Sharma during Paytms IPO. It questions whether he should have been classified as a promoter, which would have made him ineligible for Employee Stock Options (ESOPs). The notice also questions the directors of that time, asking why they supported Sharmas classification as a non-promoter. SEBIs regulations state that a company is considered to be professionally managed if no single shareholder owns more than 10% of the company or has control over its management. If Sharma had been classified as a promoter, the company would not have met this criterion.Paytm shares plunge on BSEPaytms stock took a substantial hit on Monday following the news. The shares opened on the Bombay Stock Exchange (BSE) at Rs 560, showing a slight gain compared to Fridays close. However, after reaching an intra-day high of Rs 565.45, the stock plummeted, hitting an intra-day low of Rs 505.25, marking an 11.91% drop from its peak during the day. This sharp decline reflects the markets reaction to the ongoing scrutiny and potential regulatory consequences for Paytm.
