Paytm’s parent company One97 Communications, a provider of digital financial services announced on Tuesday that the board has approved the buyback of shares through the open market for up to Rs 850 crore.
Paytm’s parent company One97 Communications, a provider of digital financial services announced on Tuesday that the board has approved the buyback of shares through the open market for up to Rs 850 crore. The board of One97 Communications (OCL), initiated a share buyback programme of 850 crores to support its falling stock price on Tuesday. Paytm shares closed at Rs. 538.40 on the Bombay Stock Exchange (BSE) on the same day.
According to a press release, the shares will be bought back for a maximum of Rs 810 each. 1,04,93,827 shares, or approximately 1.62% of the paid-up share capital of the corporation, are the indicated maximum number of shares that may be repurchased.
At least half of the funds put aside for the share buyback will be used by the company. It may be mentioned that the company had stated on December 9 that the board would be considering a share buyback.
According to Paytm, the maximum repurchase size is less than 10% of the company’s total paid-up share capital plus free reserves as of March 31, 2022.
According to Paytm, the maximum repurchase size is less than 10% of the company’s total paid-up share capital plus free reserves as of March 31, 2022. The company would buy a minimum of 5,246,913 equity shares based on the minimum buyback amount and maximum buyback price.
The share buyback comes in less than 13 months after the loss-making digital payments company’s terrible listing, which saw its shares plummet 75% from their IPO price.
It may be noted that Paytm had raised 18,300 crore with its IPO, the country’s largest, in November 2021, by offering fresh shares at a price of 2,150 rupees apiece.
Furthermore, founder of Mumbai-based Quantace Research Karthick Jonagadla saif that stock repurchase is a strategic play for Paytm since the share price has suffered sharp erosion, reported Mint.
Furthermore, founder of Mumbai-based Quantace Research Karthick Jonagadla saif that stock repurchase is a strategic play for Paytm since the share price has suffered sharp erosion, reported Mint. He added that for the buyback to be effective, the firm may need to pay a premium of 30-40% over the present price otherwise, it may not serve the purpose.
Besides, according to its most recent financial report, Paytm has a liquidity of 9,182 crore.
According to the regulatory filing, all directors present, including all independent directors, voted unanimously in favour of the motion. During the buyback period, the company’s directors and key executives will not sell any shares. The company stated that the Paytm board is confident that this buyback is indication that the firm is on track to achieve cash flow profitability and that it won’t have any impact on either its near-term growth plans or its profitability goals.
The stock of Paytm has recently received more favourable sell-side analyst attention.
The stock of Paytm has recently received more favourable sell-side analyst attention. As many as eight of the 12 analysts following the stock, according to Bloomberg, recommend a buy or similar trading, the largest number since the firm’s trading debut.
A share buyback or repurchase is when a firm buys back its shares from shareholders or investors. Buybacks are typically regarded as an alternate, tax-efficient method of returning money to shareholders.
Holdings of the payment gateway services company had increased in trading in the run-up to the meeting. The stock closed 2 percent higher at Rs 539.40 per share. The announcement is unlikely to have a substantial impact on the market on Wednesday because the repurchase is not being conducted through the tender offer procedure, which allows shareholders to tender shares at a premium.
edited and proofread by nikita sharma
