Analysts focus on profitability despite Paytm's buyback proposal

 

• The digital payments solutions provider has seen its stock plunge by nearly 74% since its mega $2.5 billion IPO in November last year

Paytm stock rose over 7% on Friday after it announced plans to consider share buyback, but analysts warned it would not provide long-term relief to investors as concerns about the Indian firm's slow path to profitability persist. Is.

The provider of digital payment solutions has seen its stock plunge by nearly 74% since its mega $2.5 billion IPO in November last year, at a time when tech stocks were taking a beating worldwide and Paytm was struggling to monetize its platform. Questions were raised about the ability of

Late on Thursday, Paytm said it would consider buyback of shares on December 13, adding that it felt the move would be beneficial to its shareholders "considering the current liquidity and financial position of the company."

Last month, Paytm had said that it would become free cash flow positive in the next 12-18 months.

Chokkalingam G, Founder, Equinomics Research & Advisory Pvt Ltd said, “This company is yet to make profits, but it is in a hurry to announce buybacks.”

Paytm did not respond to a Reuters request for comment. As some criticized its plans on Twitter, the company defended the move, saying it always "makes decisions with the long-term interest of our shareholders in mind."

The buyback plans come as several technology stocks in India face pressure amid rising interest rate environment and concerns over valuations. SoftBank-backed Indian e-commerce firm Snapdeal on Friday said it will call off its $152 million IPO plan due to adverse market conditions.

Sriram Subramanian, managing director of Bengaluru-based corporate governance advisory firm InGovern Research Services, said Paytm investors should focus on its long-term fundamentals.

"Investors should look at how the company is able to make money from their business, the path to profitability and when they will become profitable, rather than focusing on buybacks," Subramanian said.