Paytm shares decline 3% as buyback announcement fails to impress

Paytm Share Price: Shares of digital financial services firm One97 Communications, which operates Paytm, are in focus today post announcement of a share buyback programme. The stock traded lower in early morning deals, falling more than 3 per cent to Rs 525.05 on NSE. At 10 AM, the counter quoted Rs 533.25, down 1.14 per cent.

Earlier on Tuesday, the company 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, One97 Communications 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.

Post announcement of the share buyback programme, brokerages firms have revised target on the stock. Also, read- Paytm operator One97 Communications announces buyback of shares worth Rs 850 cr at Rs 810 apiece

While Morgan Stanley has tagged an ‘equal-weight’ rating on Paytm with a price target of Rs 695, JP Morgan has given 'overweight' rating' on the counter with a target price of Rs 1,100.

JP Morgan in its report said that the number of shares bought back will be 10.5 million at the maximum buyback price of Rs 810,  representing 1.6 per cent of the paid-up share capital. The

buyback amount represents 7 per cent of the paid-up capital and free reserves as of March 22 and hence shareholders’ approval is not required.

"Paytm highlighted that the company’s directors and key management personnel (KMP) will not sell shares during the buyback period.  It highlighted that the buyback won’t hamper any growth plans as it believes the company will generate excess cash after taking into account the investments required for growing the business," the brokerage firm in its report added.

The company expects the total outlay will be in excess of approximately Rs 1,048 crore, assuming a full buyback of Rs 850 crore, and applicable buyback taxes. The company said that it will continue disciplined investments to drive long-term value creation, across technology, sales, marketing, and other areas.

Paytm Share Price History

YTD, Paytm share price has tanked 60 per cent. At current level, the company has a market cap of Rs 34.69 thousand crore, according to NSE website.

Paytm made a tepid stock market debut on November 18, 2021. The Rs 18,300 crore-IPO (initial Public Offer) was launched in November with a price band of Rs 2,080-2,150 apiece. The stock got listed at Rs 1,950 apiece levels on the exchanges – 9 per cent lower than the issue price.

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