Paytm board approves Rs 850 Cr buyback at Rs 810 per share

One97 Communication, the parent entity of fintech major Paytm, on Tuesday approved buyback of maximum over 1 crore equity shares of Rs 850 crore at a maximum price of Rs 810 per share.

All directors present voted unanimously in favour of the proposal, including all independent directors, the company said in an exchange filing.  

“Approved the proposal to buyback fully paid-up equity shares of face value of Re 1 each of the company at a price not exceeding Rs 810 per equity share (maximum buyback price) and for an amount not exceeding Rs 850 crores excluding any other expenses (buyback taxes and other transaction costs) incurred or to be incurred for the buyback...” it said. 

One97 Communication also said it would be buying back 10,493,827 equity shares at the said maximum buyback price and maximum buyback size, i.e., Rs. 425 crore. This represents about 1.62% of the paid-up share capital of the company as of March 31, 2022.

The dates of the open market buyback offer shall be mentioned in the public announcement, the company said, along with details of the actual number of shares and information on post-buyback shareholding pattern.

Reiterating that the proceeds from the IPO are not being directed towards the share repurchase plan, the company said the board has determined that there is surplus liquidity that can be productively applied to a buyback of shares.

“Over the last year, there is clear business momentum, and we are ahead of our plans. Looking at the monetisation opportunities in our core payment and credit business, we feel confident to generate healthy revenues and cash flows to invest in sales, marketing and technology,” Founder and CEO Vijay Shekhar Sharma said in a statement.

According to him, the company is ahead of its previously-stated plans to achieve EBITDA profitability before ESOP costs by the quarter ending September 2023.

"Assuming a full buyback of Rs 850 crores, and applicable buyback taxes, the total outlay will be in excess of approximately Rs 1,048 crores," he said.

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Share movement

The fintech major had on December 8 announced its plan to consider a buyback of shares.

Post that, Paytm’s stock saw an upswing of as much as 7%, the most in a week. However, the momentum slowed, with the shares opening on Tuesday at Rs 535 apiece on NSE, up 1% from the previous close of Rs 528.78. The shares ended the day up 1.8% at 538.40 apiece on NSE, outpacing the benchmark Nifty index's 0.60% rise.

The firm's shares have been under pressure since it hit the bourses in November 2021, tanking almost 65.32%. The Rs 18,300 crore-IPO was launched in November with a price band of Rs 2,080-2,150 apiece. The stock got listed at Rs 1,950 a share on the exchanges – 9% lower than the issue price.

The share price had had hit an all-time low of Rs 439.60 on November 23, 2022 on the BSE and Rs 441.10 on November 24 on the NSE. At current levels, the company has a market cap of Rs 34.27 thousand crore, according to NSE website.

The share buyback announcement is unlikely to give impetus to long term movement of the share price, says Sujith SS, investment advisor and CIO at MoneyDhan. 

“Paytm’s and management track record suggests that the stock price is unlikely to give it's IPO price before year 2025. Share price which is down 50% needs a 100% rally just to break even," he said. 

On December 12, Morgan Stanley gave Paytm shares an "Equal-weight" rating, with a target price of Rs 695. On November 28, other brokerage firms, including CLSA and JM Financial, had also upgraded their outlook on the fintech major’s stock from “sell” to "buy” while Goldman Sachs had put the price targets on Paytm of Rs 1,100 with a buy rating. 

This copy has been updated to reflect the latest information.