BENGALURU (Reuters) – SoftBank-backed digital payments firm Paytm said on Tuesday its board unanimously approved a share buyback worth up to 8.5 billion rupees ($103.06 million), as it looks to build investor confidence and shore up its battered stock price.
The buyback will be priced at a maximum of 810 rupees per share, 50.2% higher than the stock’s Tuesday close of 539.40 rupees, the company said in an exchange filing, adding that it will follow the open market route.
The board believes that the buyback is a “sign of confidence that the company is on a clear path to deliver cash flow profitability”, and that it will not have any impact on Paytm’s growth plans in the near future or on its profitability plans.
The company’s directors and key management personnel will not sell any shares during the buyback period.
Formally known as One97 Communications, Paytm listed last year after a mega $2.5 billion initial public offer (IPO). Since then, however, the stock has plunged as investors worried about the sky-high valuations of tech companies amid fears of a global economic recession.
As of last close, the stock was down around 75% from its IPO offer price of 2,150 rupees.
There is surplus liquidity that can be productively applied to the buyback of shares and proceeds from the IPO are not being directed towards the share repurchase plan, Paytm said.
The buyback plan was met with criticism from some analysts and proxy advisory firms which questioned Paytm’s move to repurchase shares while not making profits.
Last month, Paytm said it would become free cash flow positive in the next 12-18 months.
Paytm had net cash, cash equivalents and investable balance of 91.82 billion rupees at the end of September, according to its latest quarterly earnings report.
($1 = 82.4740 Indian rupees)
(Reporting by Nallur Sethuraman, Chris Thomas and Anirudh Saligrama in Bengaluru; Editing by Devika Syamnath)