Paytm’s Vijay Shekhar Sharma receives SEBI show-cause notice for alleged IPO violations: Report
PTC News Desk: The Securities and Exchange Board of India (SEBI) has issued show-cause notices to Vijay Shekhar Sharma, the founder of One 97 Communications Ltd (the parent company of Paytm), and the board members who were serving at the time of its initial public offering (IPO) in November 2021. These notices are reportedly based on allegations of misrepresentation of facts related to Sharma’s classification as a promoter during the IPO process.
According to the report, the SEBI notices focus on Sharma’s alleged non-compliance with promoter classification norms. The investigation also involved input from the Reserve Bank of India (RBI), which provided critical information for SEBI’s probe.
A source familiar with the matter stated, “SEBI is of the view that Vijay Shekhar Sharma should have been classified as a promoter. It was also the fiduciary responsibility of the company’s board members to ensure the accuracy of the statements made by the founder and to validate them accordingly.”
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The source further elaborated, “While SEBI has previously targeted company directors, these cases have typically involved financial fraud. This situation is unique because SEBI is attempting to hold the directors accountable for a potential compliance oversight that neither bankers nor statutory auditors identified.”
Another source highlighted a critical aspect of the case, saying, “A significant issue is that SEBI has taken action three years after the company’s listing. SEBI was aware of the shareholding structure since the IPO offer document was filed in 2021. In addition, proxy advisory firms had flagged concerns about this issue. However, SEBI initiated action only after the controversies surrounding Paytm Payments Bank emerged.”
This development marks an unusual step by SEBI to scrutinize compliance issues and hold board members accountable for potential lapses that were overlooked during the IPO process.