Paytm's parent announces Rs 850-cr share buyback via open market at Rs 810 per share

Fintech major Paytm's parent, One 97 Communications Limited (OCL), on Tuesday announced Rs 850-crore share buyback at Rs 810 apiece, a 50% premium from the current market price.

The company has opted for the open market route through the stock exchange method for the buyback programme and expects the process to be completed within a maximum period of six months, the company said in a regulatory filing.

"The company will undertake a buyback of up to Rs 850 crore (excluding buyback taxes and other transaction costs) at a maximum price of Rs 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 6 months," said OCL in a stock exchange filing.

The company's board has constituted a buyback committee to oversee and implement the share buyback plan. The company had a liquidity of Rs 9,182 crore, as per its last earnings report.

"While Paytm will continue disciplined investments to drive long-term value creation, across technology, sales, marketing, and other areas, the Paytm Board has determined that there is surplus liquidity that can be productively applied to a buyback of shares. This decision has been taken after a detailed review of projected investment requirements to drive long-term value creation. Paytm reiterates that proceeds from the IPO are not being directed towards the share repurchase plan," added OCL. 

OCL said Paytm board believes that this buyback is a sign of confidence that the company is on a clear path to deliver cash flow profitability, and this buyback will not have any impact on its growth plans in the near future or on its profitability plans.

"The indicative maximum number of equity shares bought back would be 10,493,827 equity shares, which represent approximately 1.62% of the paid-up share capital of the company as of March 31, 2022. Based on the minimum buyback size and maximum buyback price, the company would purchase a minimum of 5,246,913 equity shares," said OCL.

Until completion of the buyback period, the company’s directors and key management personnel — Vijay Shekhar Sharma (Founder & CEO) and Madhur Deora (Executive Director, President & Group CFO) – will not be participating in any sale of shares. 

Vijay Shekhar Sharma, Founder & CEO, Paytm said: “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. 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.”

In October and November 2022, Paytm said its operating performance has shown strong growth in its lending business with the annualised run rate for the loan distribution business is now Rs 39,000 crore ($4.8 billion). The company claimed it continued to maintain its leadership in offline payments with merchants paying subscriptions for payment devices exceeding 5.5 million. 

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

On Tuesday, Paytm's scrip closed 1.8% higher at Rs 538.40.