Vivid News 24: The board of directors of digital financial services business One97 Communications (OCL), which owns the Paytm brand, announced an open market share repurchase scheme worth Rs 850 crore on December 13 to maintain its falling stock price.
The Paytm share closing price on the BSE on Tuesday was Rs 538.40. At a stock price not surpassing Rs 810 per equity share, the maximum amount for an open market buyback of equity shares through the Indian stock exchanges is Rs 850 crore, excluding buyback tax.
The maximum repurchase size, according to Paytm, is less than 10% of the company’s total paid-up share capital plus free reserves as of March 31, 2022.
The company stated in a news release that a maximum of 1, 04, 93,827 shares, or around 1.62 percent of the paid-up share capital of the company, will be repurchased. Based on the minimum buyback amount and maximum buyback price, the corporation would repurchase a minimum of 5,246,913 equity shares.
What is share buyback?
As part of a share buyback, a firm may repurchase stock from shareholders or investors. It is a means of giving money back to shareholders that is tax-efficient. The buyback increases the value of the shares because there are now fewer of them available on the market. Only a maximum of 25% of the entire paid-up capital and free reserves may be repurchased in India.
Paytm is employing stock repurchase as a strategy as a result of the sharp decrease in its share price, according to Karthick Jonagadla, the founder of Mumbai-based Quantace Research. The motion was unanimously approved by all of the current directors, including all independent directors. However, throughout the buyback period, directors and other significant corporate officials will not sell any shares.
Only roughly 13 months have elapsed since the loss-making digital payments company’s dismal market debut, which saw its shares drop 75% from the IPO price. The largest public offering in the country at the time, Paytm generated Rs 18,300 crore in November 2021 by selling fresh shares for Rs 2,150 each.
Sell-off analysts have raised their expectations for Paytm stock in recent weeks. Eight of the twelve analysts following the stock recommend a buy or equivalent, the highest proportion since the stock began trading.