Paytm can’t use IPO proceeds for buyback
One 97 Communications Ltd, the company that runs Paytm, the largest supplier of digital payments in India, cannot use the money from its massive IPO to repurchase its own shares, according to sources, who also said that the company will use its strong liquidity instead.
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According to its most recent financial report, Paytm has a liquidity of $9,182 crore.
On December 13, the company’s board of directors will meet to discuss a share buyback plan. The business had said in an exchange statement on Thursday that “the management feels that given the company’s current liquidity/financial condition, a repurchase may be beneficial for our shareholders.”
The stock is down 60% in 2022 following a much anticipated IPO in the latter part of last year, as concerns about the company’s profitability, competition, and expenses for employee stock options and marketing are raised.
According to sources, no firm is permitted to repurchase shares using the funds from an IPO.
Paytm has raised $18,300 crore through its IPO in November of last year.
Sources indicate the company is near to cash flow generation, which would be used for business expansion, even though the company had stated last month that it will become free cash flow positive in the following 12 to 18 months.
Paytm
According to sources, no firm is permitted to repurchase shares using the funds from an IPO.
Paytm has raised $18,300 crore through its IPO in November of last year.
Sources indicate the company is near to cash flow generation, which would be used for business expansion, even though the company had stated last month that it will become free cash flow positive in the following 12 to 18 months.
Despite rumours that the company is using IPO proceeds for the buyback, sources claim that no company is allowed to do this due to rules. Only the precise reason for which they were raised, which is also monitored, may be used using the profits from the IPO.
Paytm’s top management emphasised in the just finished meeting with analysts that the firm is near to cash flow generation, which would be used in the future for its further expansion.
The business has not yet published the size of the buyback or any other information, but this is likely to change after the board meeting.
There are rumours that the buyback will be priced lower than the IPO price.
Furthermore, the legislation expressly forbids any negotiated buyback arrangements or side deals.
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