Shares of One 97 Communications, the parent company of Paytm, surged over 5 percent in the morning trade on December 9 after the company said its board will consider a share buyback on December 13.
“We wish to inform you that a meeting of the Board of Directors of the company is scheduled to be held on Tuesday to consider a proposal for buyback of the fully paid-up equity shares of the company,” it said in an exchange filing.
“The management believes that given the company’s prevailing liquidity and financial position, a buyback may be beneficial for our shareholders,” Paytm added.
As of 9.30 am, the stock zoomed 5 percent to Rs 532.80. The company has brought its first buyback barely after a year of listing. It has failed to report a profit until now.
Paytm has a net cash pile (including cash equivalent and investable balance) of Rs 9,182 crore as of September 2022 including around Rs 5,600 crore left from IPO proceeds of Rs 8300 crore.
The company is yet to decide the price and size of the cashback. Buyback price is usually at a premium to prevailing prices, giving a lucrative exit route to exiting shareholders.
Most analysts have a bullish rating on the stock. Bloomberg data shows out of 12 analysts tracking the stock, eight have a ‘buy’ rating, while three have ‘hold’. Just one analyst believes you should be shorting the stock.
Some of them see the stock to multiply twice from current levels. JP Morgan and Citi are among those that have targets of Rs 1,100 and 1,055 on the stock. This is despite the stock being down to a fourth of the IPO price.
Many of them are convinced by the management’s newfound emphasis on generating profits. However, a few see it plagued by past problems and regulatory risks than may pour cold water on its plans.