Paytm will spend up to $127 million to buy back its shares, the company’s board approved on Tuesday, as the Indian financial services firm seeks to placate investors after a while. The tumultuous period has wiped out about 60% of their stock’s value this year.
The company, headquartered in Noida, went public late last year, made a proposal last week, a move that saw its stock gain momentum. Shares ended the day at 538.4 Indian rupees, or $6.53. Paytm debuted at 2,150 Indian rupees ($26) and hasn’t even recovered by half since Jan. 17. The stock fell slightly on Wednesday’s news.
The board members “unanimously” approved the company’s proposal to buy back the shares already paid in full for a price not exceeding 810 Indian rupees ($9.82) and spend $103 million excluding including taxes and other costs for share buybacks, Paytm revealed in a filing securities exchange.
Acquisitions are not uncommon and are often seen as one way that companies can reward their shareholders. Many companies have ramped up their share buybacks this year, taking advantage of the global mass-market price drop. But it’s not common in loss-making companies.
“Over the past year, there has been clear business momentum and we are ahead of our plan. Looking at the monetization opportunities in our core payments and credit business, we feel confident we will generate healthy revenue and cash flow to invest in sales, marketing and technology. . We value our shareholders and their journey with us on the mass market. I believe an acquisition at this stage will be of great benefit to our stakeholders and will drive long-term shareholder value,” said Vijay Shekhar Sharma, founder and chief executive officer of the company. Paytm, said in a statement.
Paytm will have to use the money from its books to buy back the shares. Indian law prevents the company from using the proceeds from the IPO for acquisitions. In a statement earlier on Tuesday, Paytm said it maintained “surplus liquidity” and had ensured that all of its cash requirements were “fully budgeted”.
“Management is confident of strong operating performance and remains focused on building long-term value for its shareholders,” it said. Paytm had about $1.116 billion in the bank at the end of September.
Paytm’s arch-rival PhonePe, which is also unprofitable and generates significantly less revenue, is in the later stages of consideration to raise about $1 billion from major shareholder Walmart and other companies. , including General Atlantic, at a valuation of $12 billion, according to a source familiar with the matter. Indian news outlet MoneyControl first reported on the funding talks last month.
Paytm, which was valued at $16 billion in a private funding round in 2019, currently has a market capitalization of around $4.2 billion.