Shares of Paytm traded with gains of 7.3 per cent at Rs 545.25 apiece in mid-day trade on BSE, after the fintech major announced mulling its first ever buyback on 13 December.
The press statement mentioned that in accordance with Regulation 29 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended ("SEBI Listing Regulations"), we wish to inform you that a meeting of the Company's Board of Directors is scheduled for Tuesday, December 13, 2022, to consider a proposal for the buyback of the Company's fully paid-up equity shares in accordance with applicable laws.
A share buyback is a shareholder-rewarding instrument in which an entity buys back equity shares from shareholders at a premium to the stock's current market price.
Paytm shares closed Thursday's session down 0.3 per cent at Rs 508.40 per share on the BSE. The stock has a current market capitalisation of Rs 33,033 crore.
“It believes that given the company’s prevailing liquidity/ financial position, a buyback may be beneficial for our shareholders. The outcome of the board meeting will be disseminated to the stock exchanges after conclusion of the board meeting on 13 December, 2022, in accordance with the applicable provisions of the SEBI Listing Regulations,” company added.
CLSA recently upgraded the fintech player, which will become one of the first new age players on the stock market to announce a buyback (if approved). The brokerage raised the company's rating from "Sell" to "Buy," citing a possible end to the company's cash burn in 12-18 months.
While CLSA's change in coverage stance may have given the stock a boost in the short term, it has largely taken a beating due to valuation concerns of new age companies, anchor lock-in period expiration, and other factors.
Shares of the One 97-owned company are down nearly 68 per cent from December levels of around Rs 1,570 per share.
Last month, the stock took another 10 per cent hit after SoftBank reduced its stake in the company by nearly 5 per cent, bringing it to a three-and-a-half month low.
After a report from Macquarie identified a potential risk to Paytm from Jio Financial Services, the stock fell to a near record low of Rs 475.55 per share in late November.