Paytm shares fell after the Indian fintech announced a buyback of as much as 8.5 billion rupees ($103 million), offering little respite to a stock down 75% since listing on bourses last year.
The company, whose official name is One 97 Communications Ltd., on Tuesday approved a plan to repurchase as many as 10.5 million shares at a price not exceeding 810 rupees apiece on the open market. That upper limit is a 59% premium to Thursday’s closing price, before the company said it was considering a buyback.
Shares of Paytm fell as much as 2.7%, erasing its earlier gains on Wednesday. The broader Mumbai market was flat.
While a buyback may help bolster the stock, which floated at 2,150 rupees at the initial public offering, some investors worry about management using cash to prop up the share price rather than to turn around loss-making operations. The buyback could be seen as Paytm giving an exit to investors who bought shares before the IPO, said Deven Choksey, managing director at KRChoksey Holdings.
“The company is supposed to arrest the losses before returning the capital to shareholders,” he said.
Paytm said in a filing that its board determined that there was “surplus liquidity that can be productively applied” for a buyback. Backed by China’s Ant Group Co. and Japan’s SoftBank Group Corp., Paytm had a cash balance of 91.8 billion rupees at the end of September, according to its earnings statement last month.
