Paytm’s board is meeting Tuesday to consider a share buyback after the Indian fintech company’s stock lost three-quarters of its value since its 2021 initial public offering.
(Bloomberg) — Paytm’s board is meeting Tuesday to consider a share buyback after the Indian fintech company’s stock lost three-quarters of its value since its 2021 initial public offering.
Directors of Paytm, officially known as One 97 Communications Ltd., are set to decide on the number of shares the company will potentially repurchase and at what price.
Once India’s most valuable startup, Paytm shares fell 75% for the worst first-year share plunge among large IPOs over the past decade.
It jumped 7.2% on Friday after announcing the proposed buyback, as investors assessed a repurchase program’s potential impact and the unprofitable company’s prospects.
On Monday, Paytm was down 1.1% to 538.75 rupees in a broader Mumbai market that was little changed.
“Buyback at current valuation makes a lot of sense given declining need for organic capital allocation and very compelling valuation,” Rahul Jain, an analyst at Dolat Capital Market Ltd.
in Mumbai, said in a note. He estimated the appropriate size of a buyback at about 8 billion rupees ($97 million) to 10 billion rupees and said Paytm would likely buy the shares on the open market.
Jain is among eight analysts who recommend buying the stock, according to data compiled by Bloomberg.
Three say hold and Macquarie analysts led by Suresh Ganapathy, taking an opposite view, last month flagged rising competition from billionaire Mukesh Ambani’s Jio Financial Services.
Aditya Kondawar, a partner at wealth management firm Complete Circle Capital, questioned the value of a potential buyback.
Newer companies should invest their cash in their businesses rather than attempt to manage their share prices, he said.
“They need to use it in the right manner that delivers them profits and free cash flow,” Kondawar said.
“If capital allocation is not done judiciously, the cash is going to exhaust, leaving them with a limited runway.”
Indian companies cannot use money raised from an IPO to fund a share buyback, Paytm said in an emailed statement.
Any buyback, if approved by the board, will be done using cash on the company’s books, it said.
Paytm, backed by Ant Group Co. and SoftBank Group Corp., had a cash balance of 91.8 billion rupees at the end of September, according to its earnings statement last month.
–With assistance from Anto Antony.
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