• The company's board determines that the buyback of Paytm shares would be favorable to its shareholders.
• However, the top management of the company including Founder and CEO Vijay Shekhar Sharma will not participate in the sale of shares.
India's leading digital payments and financial services provider Paytm is all set to launch a buyback totaling ₹850 crore. On December 13, all the directors of the company including all the independent directors voted unanimously in favor of the buyback proposal. The buyback plan is decided after a detailed review of the projected investment requirements to drive long-term value creation. However, the company's top management, including founder and CEO Vijay Shekhar Sharma, will not participate in the sale of shares. Paytm shares will be in focus going forward.
Vijay Shekhar Sharma, Founder & CEO, Paytm, on Tuesday said, “Over the past year, there is clear business momentum, and we are well ahead of our plans. Given the monetization opportunities in our core payments and credit business, we feel confident to invest in sales, marketing and technology to generate healthy revenue and cash flow. We value our shareholders and their journey with us to the public markets."
Sharma believes that a buyback at this stage would be extremely beneficial to our stakeholders and drive long-term shareholder value.
Here are 10 key takeaways from the Paytm buyback:
1. The company will initiate a buyback plan of ₹850 crore with equity shares to be bought back. The buyback will be done on an open market route on the stock exchanges.
2. The buyback price has been fixed at a maximum of ₹810 per share, which is a premium of over 50.13% to the current market price of ₹539.50 per share (as on December 13). Paytm plans to complete the buyback within a maximum period of 6 months.
3. At the Maximum Buyback Price and Size, the maximum number of Equity Shares to be bought back will be approximately 10,493,827 Equity Shares - representing approximately 1.62% of the paid-up share capital of the Company as on March 31, 2022. Paytm said that if the number of shares bought back is less than the maximum buyback price -- the actual number of equity shares bought back may exceed the maximum buyback shares --- but will always be subject to the maximum buyback size.
4. Paytm plans to utilize approximately 50% of the maximum buyback size --- which will be approximately ₹425 crore --- (50% of ₹850 crore). Taking into account the maximum buyback size and price, the Company will buy back a minimum of 5,246,913 equity shares in the buyback programme.
5. Till the completion of the buyback period, the directors and key management personnel of Paytm - Vijay Shekhar Sharma (Founder and CEO) and Madhur Deora (Executive Director, President and Group CFO) - will not participate in any sale of shares. According to regulatory filings, the top management's focus remains on long-term growth and value creation for all stakeholders.
6. The promoter and the promoter group do not hold any equity shares in Paytm, as on December 9, 2022, under the pre-buyback shareholding pattern. While the majority shareholding in Paytm is held by foreign investors at around 72.85%, the share of domestic institutions is around 1.82%. Meanwhile, Indian public, corporates and others hold around 25.33% of the company.
7. The Board of the Company determines that the buyback of Paytm shares would be favorable to its shareholders. In its filing, it said, considering the momentum of Paytm's financial performance, clear path for cash flow generation and consequent surplus cash, the board has determined that buyback of shares of the company would be favorable to its shareholders.
8. In addition, Paytm plans to discipline investments in technology, sales, marketing and other areas to drive long-term value creation. The Board of the Company has determined that there is surplus liquidity which can be productively applied to buyback of shares. Also, the 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 that this buyback will not have any impact on its growth plans or its profitability plans in the near future.
9. Paytm said that assuming the full buyback of ₹850 crore and applicable buyback tax --- the total outlay would be over ₹1,048 crore.
10. Paytm is ahead of its previously announced plans to achieve EBITDA before ESOP cost breakeven by the end of September 2023 quarter. Over the last 18 months, Paytm has managed to improve monetization and unit economics for the payments business. Simultaneously, the company's lending business has seen impressive growth and has contributed to the bottom line--- performance of operating leverage, resulting in improved EBITDA before ESOP cost margin of -9%
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