Paytm Slumps 8% as Large Block Deals Take Place on Bourses
Paytm, one of India’s largest digital payments and financial services companies, has recently declined its share price due to large block deals. On February 10th, shares of the company’s parent, One 97 Communications, slumped more than 8% after 2.1 crore shares, representing 3.4% of the equity, changed hands through a block deal. The identity of the buyer and seller has not yet been revealed.
This news comes after Paytm revealed earlier this week about its first quarterly positive cash EBITDA (Earnings before interest, taxes, depreciation, and amortisation) of Rs 30 crore in Q3 FY23, three quarters ahead of company guidance.
Today at 3:45 pm, the company’s shares were trading 8.75% lower at Rs 650.20 on the BSE (Bombay Stock Exchange).
Recent Performance Overview in the Market
One97 Communications, the parent company of Paytm, declared a share buyback worth Rs 850 crore in December, just a year after its initial public offering on November 18, 2021. The buyback offer, which opened on December 21, 2022, and will close on June 19, 2023, demonstrates the company’s confidence in its future profitability and its ability to deliver positive cash flow.
A company may generally opt for a buyback of its shares for several reasons. Some of the most common reasons are:
- To increase shareholder value: A buyback of shares can increase the value of remaining shares as the number of outstanding shares decreases and the earnings per share increases.
- To use surplus cash: A company may have surplus cash and no attractive investment opportunities, so it might opt to return some of the cash to shareholders through a buyback.
- To improve financial metrics: A buyback can improve key financial metrics such as earnings per share and return on equity, making the company more attractive to investors.
- To boost share price: A buyback can help boost a company’s share price by reducing the supply of outstanding shares and increasing demand.
However, despite the Paytm board’s optimistic outlook regarding its buyback, it has failed to instil similar confidence in its investors.
In a letter to shareholders, Paytm founder and CEO Vijay Shekhar Sharma stated that the company had achieved operating profitability in Q3, which was three quarters ahead of the guidance for the September quarter. Despite the share dip, Paytm’s valuation remains strong at 45,000 crores.
- Average monthly transacting users increased by 32%
- Merchants paying a subscription for payment devices 190%
- Value of loans disbursed 357%
- Value of postpaid loans 337%
As the situation develops, it will be important to keep an eye on the reason for the block deals. Nevertheless, it is clear that Paytm remains a significant player in India’s digital payments and financial services market, and its growth is a testament to its strength and resilience.
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