Paytm’s parent company, One97 Communications, has reportedly submitted a compounding application to the Reserve Bank of India (RBI) in an effort to resolve alleged breaches of the Foreign Exchange Management Act (FEMA). This move follows a show cause notice issued by the Enforcement Directorate (ED) earlier this year. According to an NDTV Profit report, Paytm has also asked the ED to pause adjudication proceedings while the RBI reviews the application.
The compounding process allows companies to acknowledge violations and pay a penalty to settle the matter, avoiding prolonged legal action. However, approval of such applications rests solely with the RBI.
The alleged FEMA violations are linked to Paytm’s acquisition of Little Internet Private Limited (LIPL) and Nearbuy India Private Limited (NIPL, formerly Groupon) between 2015 and 2019. The total amount involved is INR 611.17 Cr, of which INR 245.2 Cr is attributed to One97 Communications, while LIPL and NIPL account for INR 344.99 Cr and INR 20.97 Cr, respectively. The notice was issued not only to the company but also to current and former directors and executives.
Meanwhile, Paytm has been actively addressing various legal challenges. Founder Vijay Shekhar Sharma recently settled a Securities and Exchange Board of India (SEBI) case regarding ESOP violations, resulting in a ban on receiving fresh ESOPs from listed entities for three years and a financial penalty. The company also settled another SEBI case by paying INR 45.5 Lakh related to technical glitch norms and faced a fine of INR 1.8 Cr from Delhi GST authorities earlier this year for invoice-related non-compliance.
In addition, Paytm’s directors recently paid INR 3.3 Cr to resolve another SEBI case, and its gaming subsidiary, First Games, secured a Supreme Court stay on a hefty INR 5,712 Cr GST demand.
Despite efforts to resolve these issues, the company reported a consolidated net loss of INR 544.6 Cr in Q4 FY25, reflecting a 1% year-over-year decline. However, the loss increased 118% quarter-over-quarter. Revenue also fell 19% YoY to INR 1,911.5 Cr.
