Paytm Board unanimously approves buyback of its equity shares from open market
Dec 13, 2022
New Delhi [India], December 13 : One 97 Communications Limited (OCL), which owns the brand Paytm, has 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, a company release said on Tuesday.
The company will undertake a buyback of up to Rs 850 crore (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.
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, the release said.
"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 per cent in the quarter ending March 2021 to - nine per cent in the most recent quarter," it said.
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 release said the 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 the 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 participate in any sale of shares.
They remain focused on long-term growth, and value creation for all stakeholders, the release said.
Vijay Shekhar Sharma, Founder & CEO, Paytm said a buyback at this stage will be immensely beneficial for the stakeholders and will drive long-term shareholder value.
"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," he said.
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 Rs 39,000 crores ($4.8 billion).
The company said it 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, the release said.
Assuming a full buyback of Rs 850 crore, and applicable buyback taxes, the total outlay will be in excess of approximately Rs 1,048 crore, it added.
Paytm is India's payment "super app" offering consumers and merchants comprehensive payment services.
