After 4% Slump on ED Probe, Paytm Shares Stage a Comeback

On Monday, March 3, shares of One 97 Communications, the parent company of digital payments giant Paytm, saw a sharp decline of up to 4% during intraday trading. The drop came after the Enforcement Directorate (ED) issued a notice to the fintech firm over alleged violations of certain provisions under the Foreign Exchange Management Act (FEMA). The investigation also involves two of Paytm’s subsidiaries, raising concerns among investors about potential regulatory challenges.

Despite the initial sell-off, Paytm’s stock managed to recover all its losses by the afternoon session and moved into positive territory. The rebound was driven by a broader market recovery, which helped lift investor sentiment across sectors. Additionally, optimism surrounding a newly announced partnership between Paytm and RBL Bank contributed to renewed confidence in the stock. The collaboration is expected to strengthen Paytm’s financial services offerings, which may have reassured investors about the company’s long-term growth prospects.

On March 1, Paytm, through an exchange filing, officially disclosed that it had received a show cause notice from the Directorate of Enforcement (ED), Government of India. According to the filing, the notice was dated February 27, 2025, and was delivered to the company on February 28, 2025, at 7:27 PM.

The ED’s notice pertains to alleged violations of specific provisions of the Foreign Exchange Management Act, 1999 (FEMA), covering the period between 2015 and 2019. The alleged contraventions are linked to Paytm’s acquisition of two subsidiaries—Little Internet Private Limited (LIPL) and Nearbuy India Private Limited (NIPL), the latter formerly known as Groupon India.

Additionally, the notice also involves certain directors and officers of the company. While the filing did not specify the exact nature of the alleged violations, it indicates that regulatory authorities are scrutinizing the financial and compliance aspects of these acquisitions. The development has drawn attention to Paytm’s past transactions and regulatory obligations, highlighting the increasing oversight of financial and fintech firms in India.

Paytm further clarified that some of the alleged violations mentioned in the Enforcement Directorate’s notice are related to activities that took place before the company acquired the two subsidiaries in question—Little Internet Private Limited (LIPL) and Nearbuy India Private Limited (NIPL). According to Paytm, these alleged contraventions occurred during a period when these entities were operating independently and had not yet become part of Paytm’s corporate structure.

This distinction suggests that the compliance issues raised by the ED may be linked to the past operations of LIPL and NIPL, rather than actions taken under Paytm’s ownership. The company’s statement appears to emphasize that it may not be directly responsible for certain aspects of the case, as these issues predate its acquisition of the subsidiaries. However, since these companies are now part of Paytm, the firm is responding to the regulatory notice and addressing the concerns raised.

Paytm, a prominent fintech company, stated that it is actively working towards resolving the issue raised in the Enforcement Directorate’s notice. To address the matter effectively, the company is seeking legal counsel and carefully evaluating the appropriate course of action.

In its official statement, Paytm emphasized its commitment to handling the situation in full compliance with the applicable legal framework. The company reassured stakeholders that the ongoing regulatory scrutiny has no impact on its day-to-day operations or services. It clarified that all its services, including those for consumers and merchants, continue to function without any disruptions. Additionally, Paytm reiterated that its platform remains fully operational and secure, ensuring continued accessibility and reliability for its vast user base.

In a separate exchange filing earlier today, Paytm announced a new partnership with RBL Bank aimed at enhancing digital payment solutions for merchants. Under this collaboration, Paytm will provide its Soundbox and Card Machines to RBL Bank’s merchant partners, further strengthening the bank’s payment infrastructure.

A key feature of this partnership is the integration of the Paytm for Business dashboard, which will enable merchants to track their transactions in real time. This added transparency and operational efficiency will allow businesses to manage their payments more effectively.

Furthermore, Paytm’s payment devices are designed to support a broad range of payment methods, catering to diverse customer preferences. These include UPI, RuPay credit card transactions via UPI, UPI Lite, debit and credit card payments, as well as EMI options from leading banks. By offering multiple payment modes, the partnership aims to provide greater convenience to both merchants and their customers, fostering a seamless and flexible payment experience.

Stock Price Movement

Shares of Paytm witnessed significant volatility during Monday’s trading session, initially plunging over 4% to hit an intraday low of ₹685 per share. The stock had opened lower at ₹698.45 compared to its previous closing price and continued to decline in early trading. However, as the session progressed, Paytm shares rebounded, recovering from their losses in tandem with a broader market recovery.

The recovery came amid a strong pullback in benchmark indices. The BSE Sensex, which exhibited high volatility throughout the day, fluctuated over 850 points in intraday trade. By 1:15 PM, the 30-share index had stabilized, trading with a slight positive bias at 73,225. At the same time, Paytm’s stock had not only erased its losses but also moved into positive territory, trading at ₹730.70 per share, reflecting a 2.01% gain.

Despite recent fluctuations, Paytm’s stock has delivered strong gains over the past year, rising by approximately 76%. However, the stock has faced some selling pressure in recent months, aligning with broader market trends. Over the past one month, Paytm shares have declined by 2%, while in the last three months, they have seen a more substantial drop of 19%. This reflects the impact of market volatility and investor sentiment on the stock’s recent performance.