Stock Report

Paytm Board unanimously approves buyback of its equity shares from open market

Posted On : 2022-12-13 22:51:47( TIMEZONE : IST )

One 97 Communications Limited (OCL) that owns the brand Paytm, India's leading payments and financial services company and the pioneer of QR and mobile payments, today announced that its Board has approved a proposal for buyback of equity shares. All directors present voted unanimously in favour of the proposal, including all independent directors. The company will undertake a buyback of up to ₹850 crores (excluding buyback taxes and other transaction costs) at a maximum price of ₹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. Witnessing Paytm's momentum of financial performance, clear path to cash flow generation and excess cash as a result, the Board has determined that a buyback of the company's shares would be accretive for its shareholders.

Over the last 18 months, the company has improved monetisation and unit economics for payments business. At the same time, the lending business has shown tremendous growth, and has contributed to the bottom line. This is a clear demonstration of operating leverage, resulting in improvement of EBITDA before ESOP cost margin from -51% in the quarter ending March 2021 to -9% in the most recent quarter.

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 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.

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. They remain focussed on long-term growth, and value creation for all stakeholders.

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's operating performance has shown strong growth in its lending business with the annualised run rate for the loan distribution business is now ₹39,000 crores ($4.8 billion). The company continued to maintain its leadership in offline payments with merchants paying subscriptions for payment devices exceeding 5.5 million.

The company is ahead of its previously-stated plans to achieve EBITDA before ESOP costs profitability by quarter ending September 2023.

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

Shares of One 97 Communications Limited was last trading in BSE at Rs. 539.50 as compared to the previous close of Rs. 528.10. The total number of shares traded during the day was 269547 in over 8002 trades.

The stock hit an intraday high of Rs. 545.00 and intraday low of 533.25. The net turnover during the day was Rs. 145242098.00.