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BNPL firm Simpl under ED lens for Rs 913 Cr FDI violations

EntrackrEntrackr · 2m ago
BNPL firm Simpl under ED lens for Rs 913 Cr FDI violations
Medial

The Enforcement Directorate (ED) has filed a formal complaint under the Foreign Exchange Management Act (FEMA) against One Sigma Technologies Pvt Ltd, which operates the buy-now-pay-later (BNPL) app Simpl, for alleged contraventions amounting to Rs 913.76 crore. According to the ED’s Bengaluru Zonal Office, the investigation was triggered by credible information suggesting that Simpl received substantial foreign investment from the United States in violation of India’s FDI regulations. According to the press release, it has received Rs 648.87 crore in Foreign Direct Investment and raised an additional Rs 264.88 crore via convertible notes, treating both investments under the 100% automatic route. The company classified its business activity as “Information Technology and computer service activities” to qualify for the automatic FDI route. Simpl last raised $40 million in its Series B round in November 2021. However, the ED’s investigation found that Simpl’s core operations fall under the “financial activities” category, and according to the rules, the FDI into financial services is subject to the government approval process, not the automatic route. Additionally, according to Indian FDI rules, startups offering financial services must obtain government approval before issuing convertible notes to foreign investors. But according to the ED, Simpl did not get this required approval from the Government of India. With this, SIMPL allegedly violated FEMA provisions related to both FDI and convertible note issuance. The total contravention has been pegged at Rs 913.76 crore. The complaint against the company and its director, Nithya Nand Sharm, has now been submitted to the adjudicating authority, which will decide on penalties or further legal action under Section 13 of FEMA. This move highlights the importance of following FDI rules in India’s fintech sector, especially for BNPL and lending apps that mix technology with loosely regulated financial services.

PayU to onboard new merchants as it gets PA license from RBI

EntrackrEntrackr · 1y ago
PayU to onboard new merchants as it gets PA license from RBI
Medial

PayU has received in-principle approval from The Reserve Bank of India (RBI) to operate as a payment aggregator. The nod will also allow the fintech firm to onboard new merchants on its platform. Back in January 2023, the apex banking body (RBI) had asked PayU to reapply for the license and consequently, the Prosus-controlled firm had to halt onboarding new customers. As per reports, the fintech firm’s complex corporate structure was one reason behind the rejection. RBI appears to have become hyper-active in the last few years as it has been hammering several segments such as PA-PG, peer-to-peer lending, buy now pay later (BNPL), abuse of credit cards and structure of non-banking financial corporations (NBFCs). PayU is the latest firm to get RBI’s nod along with a clutch of fintech firms including Razorpay, Cashfree, Open, EnKash, Juspay, Infibeam et al. As per an ET report, Cred also received payment aggregator license but the official confirmation is awaited from both sides (RBI and Cred). PayU is one of the fintech firms along with MobiKwik, Pine Labs, and Navi among others, which have been eyeing initial public offerings. In India, PayU has a base of over 5,00,000 merchants across three business sectors – payments, credit, and PayTech. It also claims to generate over $60 billion in annualised volumes (read as total transaction volume or TPVs). PayU’s Indian entity reported more than 30% growth in its revenue to $400 million (Rs 3,300 crore) for the financial year ended in March 2023. Even in the current fiscal, the firm maintained the show with $211 million (Rs 1,700 crore) in revenue from Indian operations.

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