Digital financial services firm One97 Communications, which operates under the Paytm brand, on Tuesday announced a share buyback scheme worth Rs 850 crore at Rs 810 apiece. 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 crores (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 six months," Paytm said in the filing.
The maximum buyback price of Rs 810 per share is 50 per cent premium to the closing price as on board meeting date which closed at Rs 539.5 apiece, up by 2.16 per cent, at the BSE.
Assuming a full buyback of Rs 850 crore, and applicable buyback taxes, the company expects the total outlay will be in excess of approximately Rs 1,048 crore.
The company said that it 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," the filing said.
The company had a liquidity of Rs 9,182 crore, as per its last earnings report.
Paytm Founder and CEO Vijay Shekhar Sharma said that there is clear business momentum over the last year and the company is ahead of its 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," Sharma said.
The decision for share buyback was taken at the company's board meeting held on Tuesday.
"All directors present voted unanimously in favour of the proposal, including all independent directors," Paytm said.
Proxy advisory firm IiAS has said that Paytm's share buyback plan is essentially a return of equity capital to its shareholders as the company has been reporting cash losses every year, while the digital financial services firm said that it remains focussed on building long-term value for stakeholders.
Institutional Investor Advisory Services (IiAS) said the buyback of shares at less than Paytm's IPO launch price of Rs 2,150 apiece will favour Paytm's pre-IPO shareholders.
"Employees have been issued stock options at a significant discount to market price; Vijay Shekhar Sharma was granted 21 million stock options at Rs 9 in FY'22 alone," IiAS said.
The proxy firm has projected that IPO shareholders are unlikely to see the buyback positively unless they entered the stock at a price lower than the to-be-announced buyback price.
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