SUMMARY
Paytm gets approval for the maximum buyback price of INR 810 per share, nearly 50% up from its closing price on December 13
The company’s directors and key management personnel will not sell any shares until the completion of the buyback period
Paytm stock closed 2.16% higher at INR 539.50 in Tuesday’s Trading session
One97 Communications, fintech major Paytm’s parent company, has approved the buyback of equity shares of up to INR 850 Cr from the open market.
The deal is expected to close in the next six months and will be undertaken at a maximum price of INR 810 per share via open market. This is nearly 50% higher than Paytm’s closing price on the BSE on December 13.
“The company will undertake a buyback of up to INR 850 crores (excluding buyback taxes and other transaction costs) at a maximum price of INR 810 per share and has opted for the open market route through stock exchanges method, which is to be completed within a maximum period of six months,” the fintech startup said in a BSE filing.
The total corpus of INR 850 Cr will not include other expenses such as filing fee payable to SEBI, stock exchange fee and advisors’ fee. The total outlay of the equity buyback scheme is expected to be in excess of around INR 1,048 Cr.
Paytm said that all directors, including independent directors, present at the meeting unanimously voted in favour of the proposal.
Paytm said that its board believed that a buyback of shares would be accretive for its shareholders, adding that its ‘surplus liquidity’ could be ‘productively applied’ for a buyback.
As part of the transaction, the company’s key management personnel (KMP), including founder and chief executive officer Vijay Shekhar Sharma and executive director and group chief financial officer (CFO) Madhur Deora, will not participate in any sale of shares until the completion of the buyback period.
“… We value our shareholders and their journey with us in the public markets. I believe that a buyback at this stage will be immensely beneficial for our stakeholders and will drive long-term shareholder value,” Sharma said.
In The Middle Of A Storm
The approval comes close on the heels of critics seeking more clarity on how the company plans to manage with less cash after the share buyback.
In response, Paytm claimed that it fueled the buyback through surplus liquidity, adding that it has improved monetisation and unit economics for payments business over the past 18 months. The company added that the move will not have any impact on its growth plans in the near future or on its profitability.
In its BSE filing, Paytm has stated that it is ‘ahead of its plans to achieve EBITDA before ESOP costs profitability by the second quarter (Q2) of the financial year 2023-24 (FY24)’.
As of now, the fintech major has been bogged down by negative market sentiments and mounting losses that have wreaked havoc on its market capitalisation.
Paytm reported a loss of INR 571 Cr in the second quarter (Q2) of FY23, up 21% year-on-year (YoY). Its revenue from operations surged 76% YoY to INR 1,914 Cr during the same period.
Shares of Paytm have lost more than 72% since its listing. From a record high market capitalisation of INR 1 Lakh Cr, the startup’s valuation has nosedived to INR 35,031 Cr, pointing to the raging negative investor sentiment.
In the lead up to the announcement, the startup’s shares rallied on the bourses. At the end of the intraday trading on Tuesday, Paytm stock closed 2.16% higher at INR 539.50 on the BSE .
