Paytm: Considers BuyBack

Paytm: shares increase 7% as the board prepares to discuss a share buyback plan on December 13 .

Shares of One 97 Communications Limited, the firm that owns the Paytm brand and is pushed by Vijay Shekhar Sharma, rose roughly 7% in intraday trading on Friday after the business revealed its intention to pursue a share repurchase.

According to a release the company sent to the BSE. One 97 Communications has scheduled its board meeting for December 13 (Tuesday) to discuss the share buyback proposal.

We would like to inform you that a meeting of the Board of Directors of the Company is scheduled to be held on Tuesday, December 13, 2022 to consider a proposal for the buyback of the fully paid-up equity shares of the Company, in accordance with the applicable provision under the Companies Act, 2013. This meeting will be held pursuant to Regulation 29 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended (“SEBI Listing Regulations”).

“The management thinks that a repurchase could be advantageous for our shareholders given the Company’s current liquidity/financial condition. Following the Board meeting on December 13, 2022, the results will be announced to the stock exchanges in accordance with the relevant SEBI Listing Regulations, it was noted in the announcement.

A few weeks prior, when the pre-IPO lock-in period for investors had expired, investor Softbank initiated a block deal to sell shares worth around $200 million, placing pressure on the company’s valuation.

How do share buybacks work?

In a share buyback or repurchase, a company typically pays more than market value to investors or shareholders to purchase its own shares. It is regarded as an alternate, tax-effective method of paying out dividends to shareholders.

History of Paytm Share Price

Patym traded 4.5 percent higher at Rs 531.50 at 9:30 AM on the BSE, with over 3.37 lakh shares changing hands. The S&P BSE Sensex, in contrast, was up 0.1% at 62,615 points.

Paytm trades at a huge 75% discount to its IPO price of Rs 2,150 per share at the current market levels. The stock has been on a downward trend since the company’s Rs 18,300 crore IPO in November 2021; on November 23, 2022, on the BSE, it reached an all-time low of Rs 439.60.

What Claim Analysts?

One 97 Communications recently spoke with analysts and sounded upbeat about its growth prospects while reinforcing its guidance on operating profit next year.

According to ICICI Securities, which was present during the company’s analyst day meet, “Management highlighted that the road to achieving operating profitability (EBITDA before ESOP cost) via constant margin improvement has exceeded its estimates in the past few quarters.”

On November 28, the international brokerage firm CLSA changed the stock’s outlook from “sell” to “buy,” adding that the cash burn should stop in “next 4-6 quarters.”

In terms of earnings, One 97 Communications’ Q2 net loss increased to Rs 588.80 crore for the quarter that ended in September 2022 from Rs 461.20 crore in the same quarter the previous year. However, overall revenue increased 36% YoY to Rs 1,490.20 crore from Rs 1,095.60 crore.

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