Paytm shares slump over 2% after buyback announcement


NEW DELHI: Shares of One97 Communications, parent of Paytm, fell more than 2% to hit an intraday low of 525.05 apiece in early deals on Wednesday, a day after the company approved its first ever share buyback worth up to 850 crore. The board of the company has approved the buyback at 810 rupees each, a massive 62% discount to the IPO price of 2,150 rupees, but at a 50% premium to Tuesday’s closing price.

On Wednesday, the stock had opened at 544, but soon fell weighing on hopes of shareholders and market participants who were expecting a rally in the company’s stock price after the buyback announcement.

Paytm expects to spend 1,048 crore on the buyback, with up to 850 crore used to buy shares and the rest on accounting for applicable buyback taxes.

The company had a cash reserve of 9,182 crore at the end of the September quarter, which includes unused proceeds from its IPO. The company, however, cannot use the IPO proceeds for buyback as per regulations.

The buyback has to be completed in six months.

The move could help the fintech company give a boost to its stock, which has fallen more than 75% from its IPO (initial public offering) allotment price of 2,150.

Paytm said that the vote was unanimous in favour of the buyback plan, “including all independent directors”, and added that the decision has been taken after “a detailed review of projected investment requirements to drive long-term value creation”.

“Looking at the monetization opportunities in our core payment and credit business, we feel confident of generating healthy revenues and cash flows to invest in sales, marketing and technology,” managing director and chief executive officer Vijay Shekhar Sharma said.

However, proxy advisory firm Institutional Investor Advisory Services (IiAS) on Monday raised questions on the timing of Paytm buyback as the company is not yet cash flow positive. It also raised concerns about the fintech’s future growth strategy and liquidity status.

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