The Paytm stock price closed Tuesday’s session at Rs 539.50, up 2.16% over Monday’s close.
The board of One97Communications, owner of Paytm, on Tuesday approved a buyback of equity shares of the company at a price not exceeding Rs 810 per share and for an amount of up to Rs 850 crore. The firm, backed by Ant Group and Softbank, had cash and equivalents of Rs 9,180 crore at the end of September.
The company said the buyback will take place in the open market through the stock exchange mechanism but has committed to utilising at least 50% of the amount earmarked, or Rs 425 crore. Based on the minimum buyback size and maximum buyback price, the company would purchase a minimum of 5,246,913 equity shares, it said in an exchange filing.
In an open-market offer, purchases are routed through the stock exchange, and the price can vary, as opposed to a tender offer.
The Paytm stock price closed Tuesday’s session at Rs 539.50, up 2.16% over Monday’s close.
The stock has plunged about 70% since it listed on the exchanges in November 2021; the company’s IPO was priced at Rs 2,150 per share.
While the buyback might help arrest the slide in the share price, at least temporarily, analysts and proxy advisory firms are not convinced it would help the business in the long run. They question how the company will manage with less cash than anticipated by the management for its growth plans at the time of the IPO.
Proxy firm IIAS wrote in a note: “ What has changed for the board to believe that its current liquidity is sufficiently in excess that it can be returned to shareholders?” The board must also explain how it has determined that the post-buyback liquidity will be sufficient to meet the unexpected investments in new initiatives outlined by the firm at the time of the IPO, the firm added.
The maximum buyback size represents 6.67% and 6.97% of the aggregate of the total paid-up equity capital and free reserves of the company.
