Paytm shares drop 3% as Rs 850 crore buyback fails to cheer investors

Shares of One 97 Communications (Paytm) declined 3 per cent in Wednesday’s trade after the company board approved a Rs 850 crore share buyback proposal.  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.

Following the development, the scrip fell 2.57 per cent to hit a low of Rs 525.60. It recovered some ground later and the scrip was trading at Rs 534.10 apiece, still down 1 per cent. Paytm shares had jumped 4 per cent in the previous two sessions. 

Paytm will undertake a buyback of up to Rs 850 crore at a maximum price of Rs 810 per share.  The company 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,” Paytm 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. 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.