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Paytm can’t use IPO proceeds for buyback; co’s strong liquidity to be used

One 97 Communications Ltd, the operator of India‘s largest digital payments supplier Paytm, can’t use proceeds of its mega preliminary public providing (IPO) for the proposed repurchase of its personal shares, as guidelines prohibit such a transfer, sources stated, including the agency will use its robust liquidity for the aim. has a liquidity of Rs 9,182 crore, as per its final earnings report.

The corporate’s board is scheduled to satisfy on December 13 to contemplate a share buyback proposal. “The administration believes that given the corporate’s prevailing liquidity/ monetary place, a buyback could also be useful for our shareholders,” it had acknowledged in an trade submitting on Thursday.

After a much-watched itemizing late final yr, the inventory is down 60 per cent in 2022 amid a world tech selloff and questions swirl across the agency’s profitability, competitors and prices associated to advertising and worker inventory choices.

Sources stated laws forestall any firm from utilizing IPO proceeds for a share buyback.

Paytm had in November final yr raised Rs 18,300 crore by the IPO.

Whereas the corporate had final month stated it might turn out to be free cash flow optimistic within the subsequent 12-18 months, sources indicated the agency is near money stream technology, which can be used for enterprise growth.

Amid a buzz that the corporate is utilizing IPO funds for the buyback, sources stated laws bar any firm from doing so. The proceeds from the IPO can solely be used for the particular goal it’s raised for and that too is monitored.

Within the lately concluded assembly with analysts, Paytm’s prime administration highlighted that the corporate is near money stream technology, which sooner or later can be used for its additional growth.

Sources stated Paytm perhaps will use its pre-IPO money reserves for the buyback and within the close to future, it’s going to begin utilizing the generated money stream for its growth.

The corporate has thus far not offered any particulars of the buyback and dimension, and different particulars are more likely to be disclosed after the board assembly.

There’s hypothesis in regards to the buyback being at a value beneath the IPO value.

Moreover, the legislation particularly prohibits aspect offers or negotiated offers for a buyback.

As a thumb rule, an organization undertakes a buyback programme when it has surplus money stream, which is sitting idle, or if its shares can be found at a value beneath intrinsic worth, and therefore it is a good time to retire capital.

In Paytm’s case, the buyback programme meets the standards.

The corporate once more reiterated in its second quarter outcomes that it’s going to attain profitability by the tip of September 2023.

Paytm’s current numbers confirmed income surging by 76 per cent year-on-year and the losses narrowing by 11 per cent quarter-on-quarter.

Paytm reported a Rs 2,325 crore loss in 2021-22. It posted Rs 628 crore loss within the June quarter of 2022-23, which was trimmed to Rs 588 crore within the September quarter.

Its Friday closing value on the BSE at Rs 545 is decrease than the IPO value of Rs 2,150. PTI ANZ BAL

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