“The buyback, even if SES takes the statement of the company with a pinch of salt, that only pre-IPO funds will be used, will allow all investors to cash out. IPO investors would be getting almost 25-30% of their cost whereas some pre-IPO investors would be getting more than 1,000 times their investment,” SES said in a report.
Paytm said it strongly disagreed with the observations made by the proxy advisory firm.
“Over the last year, our strong business momentum has put us ahead of our plans. The monetisation opportunities in our core payment and credit business, make us confident to generate healthy revenues and cash flows while continuing to invest in sales, marketing, and technology,” the company’s spokesperson said in response to an ET query.
“This clear growth trajectory has made Paytm’s Board confident that there is surplus liquidity that can be productively applied to a buyback of shares.”
The spokesperson said the company continues to remain committed to its goal to generate ‘EBITDA before ESOP Costs profitability’ within the time frame disclosed to the market.
Earlier in December, Paytm told analysts it remained focused on attaining operating profitability and generating free cash flows (net of capital expenditure) in the next 12-18 months.
Paytm raised 18,300 crore last year in November through an IPO—India’s largest ever till then– at 2,150 per share. In the IPO, 8,300 crore was through fresh issue of shares by the company while the rest was an offer for sale by existing shareholders. The stock has declined 75% from the IPO price.
Paytm said that the company’s directors and key management personnel will not sell shares during the buyback period. The company has net cash, cash equivalent, and an investable balance of 9,182 crore as of September 2022.
JP Morgan, in a note on Tuesday, said the buyback announcement at a 50% premium to provide support to the stock price in the near term.
SES said the buyback is “technically at the borderline of law” and sought “regulatory scrutiny”.
“..With red flags waving over the intent behind an ab-initio action of raising funds through IPO and a subsequent contradictory move of the proposed buyback, there exists a requirement for a regulatory scrutiny to identify the factors behind such board room decisions,” the SES report said.
