According to a regulatory filing, Paytm purchased 2,22,000 shares in a buyback at an average price of Rs 558.95 per share.Since Paytm’s pre-acquisition earnings statement, days have gone by. The total number of equities that Paytm has acquired now stands at 1,48,92,146. The corporation’s losses were cut, and its shares ended the day up 6%.
Why does Paytm buyback its stock?
One97 Communications, the company that runs Paytm, said on December 13 that the board has approved a Rs 850 crore share buyback just one year after it went public on November 18, 2021. At a price not to exceed Rs. 810, the business will repurchase shares, representing a 50% premium over the day’s closing price of Rs. 539.50. Directors and other senior management members of the company will not sell any shares during the buyback period.
The Paytm board feels that the repurchase is a demonstration of confidence that the business is on track to achieve cash flow profitability and that it would have no effect on their near-term growth ambitions or their profitability goals. The Paytm board has stated that there is excess cash available for a share repurchase that would be beneficial. The business added that the share repurchase programme is not being funded with the IPO proceeds.
Stakeholders Empowerment Services (SES) is still worried about the abuse of discretion in deciding how much money was raised in the IPO. SES stated in a note on December 14 that “perhaps it was a good chance for current shareholders to encash at Rs 2,150, creating a frenzy and luring retail stockholders.” By avoiding selling pressure and providing pre-IPO investors with a window to sell and avoid capital gains while also using the proceeds to buy from the market at the going rate, the company is achieving two goals at once: making their new transaction tax neutral, having pocketed gains, and increasing demand.
Buybacks are commonly used to return excess money to shareholders in a tax-efficient manner. They demonstrate that the company generates a lot of cash flow, which is critical to maintaining its growth trajectory. In the case of Paytm, the company still acknowledges annual cash losses. As a result, the repurchase amounts to a return of equity to the company’s shareholders.
According to BSE statistics from September, Vijay Shekhar Sharma owns 8.91 percent of One97 Communications. The remaining shares are held by institutional (domestic) investors to the tune of 1.34 percent, institutional (international) investors to the tune of 77.25 percent, retail investors to the tune of 6.37 percent, and Axis Trustee Services to the tune of 4.77 percent. Foreign international brokerages like Morgan Stanley and JP Morgan have so far maintained their faith despite the stock price’s persistent decline.
“We anticipate it to lose $33 million over the following three quarters, breaking even in terms of adjusted EBITDA in Q2 FY24. The stock is expected to reach Rs 1,100 by March 2023, according to a forecast set by JP Morgan in a note published on December 14. “The drop in cash due to the repurchase offsets the fall in share count and keeps our target price intact,” the bank stated.
Sebi’s new buyback guidelines
According to analysts, the market regulator Sebi’s tightening of buyback requirements will assure transparency and efficiency, benefit investors, particularly retail players, shorten the process’s duration, and provide corporations with more flexibility. Sebi made a number of important decisions to modify the rules governing how firms might repurchase shares during its board meeting in December. At a news conference on December 20, Sebi chairman Madhabi Puri Buch stated that the modifications “seek to simplify the buyback process, establish a fair playing field for investors, and promote ease of doing business.”
Any gain or loss on purchases or sales is subject to capital gains tax, with the exception of buyback transactions, which are tax-free in the hands of the shareholder but are taxed at source with the corporation paying the repurchase tax at a rate of 20%. Shareholders receive the whole amount without any tax breaks.
According to Sebi, these changes to the buyback rules “appear to have been implemented to increase the overall efficacy of buybacks and concurrently reduce misuse and loopholes in the present rules,” in accordance with the proposed under the new guidelines.
This does not necessarily mean that the regulations will be made stricter; rather, it will allow for greater flexibility in some areas. The move, however, is not just meant to tighten the rules because Sebi has proposed flexibility in some buyback aspects that are beneficial for the companies, such as allowing two buybacks rather than just one in a 12-month period, raising the maximum limit for buybacks from 25% to 40% of the paid-up capital, and releasing the company’s reserves.
Strong device adoption increases subscription revenues and payment volumes with our subscription as a service model, while widening the funnel for our merchant loan distribution. In an exchange filing, the business stated The company providing digital banking services that uses the Paytm name is called Paytm. India’s top payment app, Paytm, provides both customers and businesses with a wide range of payment options.
Paytm reports a 327% increase in credit offtake at Rs 3,928 crore.
After the company’s loan division saw a 327% year over year (YoY) increase in disbursements to Rs 3,928 ($480 million) in January 2023, To Rs 621.40, One 97 Communications (Paytm) climbed by 5.46%. The overall number of loans disbursed as of January 31, 2023, climbed by 103% (YoY) to 3.9 million. More than 6.1 million merchants now pay a subscription fee for payment devices.Merchant payment volumes (GMV) reached Rs 1.2 lakh crore ($15 billion) in January 2023, an increase of 44% compared to the same month last year.
“We have a big addressable market for payments thanks to our customer and merchant base, which also offers a long development horizon.” “We continue to work with our partners so that we may keep our focus on the quality of the book,” the company said. The Paytm Super App continues to see increasing consumer engagement, with an average monthly transacting user (MTU) of 89 million in January 2023, indicating a growth of 29% year over year.
In comparison to the net loss of Rs 778.40 crore in Q3 FY22, the firm recorded a combined net loss of Rs 392 crore in Q3 FY23. Net sales increased 41.6% year on year to Rs 2062.20 crore in Q3 FY23.EBITDA before ESOP costs was Rs 31 crore in Q3 FY23, compared to negative Rs 393 crore in Q3 FY 2022 and negative Rs 166 crore in Q2 FY 2023.From negative 27% of revenues in Q3 FY22 and negative 9% of revenues in Q2 FY23, EBITDA before ESOP cost margin increased to 2% of revenues in Q3 FY23.
In the meantime, a foreign broker raised the Paytm shares from “underperform” to “outperform” by two notches. The firm has increased the stock’s target price from Rs. 450 to Rs. 800. By a significant margin, Paytm “has pleasantly surprised on the distribution of financial services income and has also been able to limit total expenditures and levies,” the broker said.
Paytm’s founder and CEO, Vijay Shekhar Sharma, said that the company was able to achieve operating profitability three quarters ahead of schedule. Q2 of 2023–2024 would realise operating profitability, the company has previously stated.
edited and proofread by nikita sharma
