SEBI Issues Show Cause Notice To Paytm Over 2023 Disclosure

India's Securities and Exchange Board of India (SEBI) issued a show cause notice (SCN) dated August 11 to the key managerial personnel (KMP) of Paytm, the fintech major, over alleged violations of disclosure norms related to a corporate announcement made in December 2023, per Inc42.

The notice questions two issues: the timing of the December 6, 2023 announcement and whether the information was correctly classified as unpublished price sensitive information (UPSI). In an exchange filing, Paytm said it is reviewing the SCN and will respond to SEBI within the required two-week window. The company also stated it sees the matter as having no financial impact on its business.

The underlying December 2023 announcement disclosed that Paytm was scaling down small-ticket loans of less than ₹50,000 — predominantly its postpaid loan product — to focus on higher-value personal loans. "In line with its continued focus on driving a healthy portfolio, the company has recalibrated the portfolio origination of less than ₹50,000, which is prominently the postpaid loan product and will now be a smaller part of its loan distribution business going forward," the company said at the time, as quoted by Inc42. Following that announcement, Paytm's stock fell nearly 19% in a single session to a seven-month low on the BSE, after which brokerages including Goldman Sachs, Jefferies, and JM Financial cut their price targets for the company.

The notice was also issued under the SEBI (Prohibition of Insider Trading) Regulations, 2015, according to Inc42, which notes SEBI is likely probing whether Paytm failed to disclose a material event on time, whether it properly assessed the market impact, identified the information as price-sensitive, kept it confidential, and maintained adequate insider-trading controls. The specific allegations against the KMP have not been made public.

The notice arrives as Paytm's stock has been on an upswing. The company's shares have risen more than 19.6% over the past month and are up 23.6% on a year-to-date basis, buoyed by strong Q1 FY27 results and the Indian government's consideration of a merchant discount rate (MDR) on select UPI transactions, per Inc42. The company reported a 79% jump in consolidated net profit to ₹220 Cr in Q1 FY27, compared with ₹123 Cr in the year-ago quarter, with revenue from operations growing 28% year-on-year to ₹2,448 Cr. Paytm shares closed Wednesday's session 0.16% lower at ₹1,605.5 on the BSE.

Paytm has two weeks to respond to SEBI's notice. The outcome could determine whether the regulator proceeds to a formal investigation into the company's disclosure practices and insider trading controls around the December 2023 announcement.