Monday, February 26, 2024

Will Vijay Shekhar of Paytm become the second Subrata Roy Sahara? This mess is a big deal

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What connection does Paytm case have with Sahara?

Year 2016… a few days before demonetization, a common man from a middle class family… reaches the house of the then Chief Minister of Uttar Pradesh Akhilesh Yadav in a pedal rickshaw to meet him. This man was none other than Vijay Shekhar Sharma, the brightest star of the country’s startup movement and the founder of the country’s largest digital payment company Paytm. His simple way of avoiding the traffic jam made a lot of headlines at that time.

Now come straight to the day of 31 January 2024, the country’s banking regulator Reserve Bank of India (RBI) cracked such a whip on them that their entire business is about to be closed. This was not a sudden incident, rather its script had started being written with the inception of Paytm Payments Bank. In such a situation, a big question arises whether Paytm founder Vijay Shekhar Sharma is also going to become Subrah Roy of Sahara India? Let us understand the connection…

Paytm keeps making mistakes after mistakes

China’s Alibaba Group had a huge investment in Paytm. Even now its subsidiary Antfin Netherlands holds more than 9% stake in Paytm. It would not be an exaggeration if Paytm is called the Indian version of Alibaba Group’s payment option ‘Ali-Pay’. When demonetization took place in the country on 8 November 2016, Paytm benefited the most. Vijay Shekhar Sharma himself had given a full page advertisement in all the major newspapers of the country the very next day.

Inspired by the success of Paytm, Vijay Shekhar Sharma started creating ‘Paytm Payments Bank’ in 2017. This is where his bad times started. With direct entry into the banking sector, Paytm came under the regulatory framework of the Reserve Bank of India. The regulator had been continuously asking Paytm since 2018 to improve its working methods. But neither Paytm nor Vijay Shekhar Sharma will pay any attention to them.

After this, in 2021, Paytm had to turn to the stock market due to pressure from its investors. The company launched the country’s largest IPO till then, but after this its functioning became a part of public scrutiny. Therefore, not just one but two regulators, RBI and SEBI, started paying attention to every rule being ignored.

Today, Paytm is the largest payment company in the country with 3.3 crore Paytm wallets. Perhaps this is the reason why he did not pay heed to the regulator’s instructions in time, the result of which today is visible in the entire business being banned. Not one but many warnings were given to Paytm. These include IT audit of transaction data, fund transactions between Paytm and Paytm Payments Bank, funding from China, manipulation of data and ignoring KYC rules, to name a few. If all the allegations against Paytm are proved, then the license of its bank may be canceled and even investigation by ED may occur. Don’t you see a glimpse of Sahara India’s case in all this?

Trouble with regulator and sinking of Sahara

Now if we look at the case of Sahara India in the context of Paytm’s mistakes, many similarities will be seen. Subrata Roy, who started Sahara India, also came from a middle class family, who used to travel on a scooter in the beginning of his career. Then the saving schemes started for the rickshaw pullers and cart pullers changed their fortunes. Apart from finance, Sahara India’s business extended from real estate to aviation, insurance, hospitality, media and entertainment and FMCG.

There came a time for Sahara India when it became the second largest employer in the country after Railways. The number of employees of the company reached 12 lakhs. Sahara India was the prime sponsor of the country’s cricket and hockey teams. Sahara achieved all this without listing in the stock market. Then came the year 2009, when Sahara approached SEBI to list one of its real estate ventures ‘Sahara Prime City’.

From here Sahara came under the notice of market regulator SEBI. During the investigation of the company’s papers, SEBI found that Sahara had raised money from about 3 crore people without following the rules. Whereas according to SEBI rules, companies have to take permission from SEBI to raise money from more than 50 people. After this, SEBI also received two complaints, in which there was talk of Sahara’s convertible debentures being illegal and there were irregularities in them. After this SEBI started investigation on Sahara.

SEBI asked Sahara for details of all its investors. Meanwhile, the company’s chairman and MD Subrata Roy Sahara started giving his clarification on media channels across the country and putting SEBI’s investigation in the dock, because his business was not a listed company. The matter dragged on for several months and reached such a stage that Sahara sent documents of 3 crore investors in 127 trucks to the SEBI office. In fact, this was seen as a threatening attitude of Sahara towards SEBI.

The matter progressed further and reached the Supreme Court. The Supreme Court ruled in favor of SEBI and asked Sahara Group to pay Rs 24,000 crore to SEBI. Sahara Group started making noise in this and finally the Supreme Court ordered the arrest of Subrata Roy in the case of ‘contempt’. Here too Subrata Roy did a high-voltage drama and then the police had to arrest him and bring him back from Lucknow. The result of messing with the regulator and the Supreme Court was that he had to stay in Tihar Jail for 2 years.

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