Paytm to buy back shares worth Rs 850 cr

To pay Rs 850 apiece and expects the process to be completed in six months

New Delhi: Digital financial services firm One97 Communications, which operates under the Paytm brand, on Tuesday announced a share buyback worth Rs 850 crore at Rs 810 a piece.

The company has opted for the open market route through stock exchanges 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 six months,” Paytm said in the filing.

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. Return of equity capital?

Earlier, proxy advisory firm IiAS has said that One97 Communications share buyback plan is essentially a return of equity capital to its shareholders as the company has been reporting cash losses every year. Institutional Investor Advisory Services (IiAS) on Monday said buyback of shares at less than Paytm’s IPO launch price of Rs 2,150 apiece will favour Paytm’s pre-IPO shareholders.

It said employees and 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. One 97 Communications Limited (OCL) had listed itself at an initial public offering (IPO) price of Rs 2,150, which was trading at around 75 per cent lesser price of Rs 538.20 on the BSE on Tuesday.

IiAS said buybacks are generally used as tax-efficient instruments to return excess cash to shareholders and they signal that the company has strong cash flow generation, which is more than required to maintain the company’s growth trajectory.

“In Paytm’s case, the company continues to report cash losses annually. Therefore, the buyback is essentially a return of equity capital to its shareholders,” IiAS said. Paytm denies charge However, Paytm said that it remains focussed on building long-term value for stakeholders.

Paytm said that its buyback proposal will fully comply with the statutory framework and regulations that govern the formulation of a share buyback plan, and the decision whether or not to approve it will be made by Paytm’s board after a due diligence.

“The management is confident of strong operational performance and remains focused on building longterm value for its shareholders,” a Paytm spokesperson said. The spokesperson added that the company cannot use IPO funds for any proposed buyback, as it is not allowed as per regulations. “Paytm’s plan for a buyback is driven by its strong financial performance and liquidity,” Paytm said.