India’s one of the leading mobile payments providers and financial services companies, has notified the exchanges about the plans to buy back their shares. The company’s management is very much sure about the step as they believe this discussion to be beneficial for the shareholders.
According to the company, this decision was a result of the solid financial position and liquidity of the company. The final approval for the first buyback of the company will be signed in a board meeting that is to be on 13th December.
This announcement was appreciated by investors and analysts. This happened due to the sharp surge of stocks in the trading session on Friday. All details about the buyback are to be revealed by the company after the completion of the board meeting. But before the meeting, the media was already on the move and started speculating about Paytm.
People have started comparing this move by Paytm to Warren Buffet’s Berkshire Hathaway, a US multinational conglomerate. Someone pointed out on Twitter that the move to buy back its own share Paytm looks quite similar to how Berkshire Hathaway did it in the past. This is done when the management strongly believes that the stakes are below their intrinsic value and the cash reserves of the company are impacted much. An important point to be noted is Berkshire Hathaway is an investor of Paytm.
Another important reason to go for this proposal of bye back is the solid net cash that Paytm holds cash equivalent and a balance of ₹9182 crores that can be invested.
An analysis by Dolat Capital, a brokerage firm, indicates that buying back the stocks in the current state of Paytm company makes sense. It has led to an organic decline and a compelling valuation for the company business. Dolat Capital’s analysis has noted a very positive mindset and enhanced confidence in the company that will buy and maintain the stocks with a TP of ₹1400.
Paytm went for this proposal after having consistent growth for a lot of quarters. This growth was achieved with a robust business model and simultaneous development of money from the businesses of payments, devices, and financial services. This growth of Paytm has been observed in the company’s 75 % revenue growth year on year at ₹ 1914 crores. With that, a 224% year-on-year contribution profit surge at ₹843 crores in Q2FY23.