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Nw : Paytm can’t utilize IPO proceeds for buyback

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NEW DELHI: One 97 Communications Ltd, the operator of India’s greatest digital funds provider

Paytm

, can’t utilize proceeds of its mega initial public offering (

IPO

) for the proposed repurchase of its possess shares, as rules restrict such a walk, sources talked about, adding the agency will utilize its right liquidity for the reason.
Paytm has a liquidity of Rs 9,182 crore, as per its final earnings describe.
The firm’s board is scheduled to fulfill on December 13 to own in thoughts a share buyback proposal. “The management believes that given the firm’s prevailing liquidity/ monetary build, a buyback could well be priceless for our shareholders,” it had talked about in an commerce submitting on Thursday.
After a substantial-watched itemizing slack final yr, the inventory is down 60 per cent in 2022 amid a world tech selloff and questions swirl across the agency’s profitability, opponents and costs linked to marketing and employee inventory choices.

Sources talked about rules prevent any firm from the utilize of

IPO proceeds

for a share buyback.
Paytm had in November final yr raised Rs 18,300 crore by the IPO.
Whereas the firm had final month talked about it could well well change into free money waft certain within the subsequent 12-18 months, sources indicated the agency is end to money waft skills, that could well also be obsolete for enterprise growth.
Amid a buzz that the firm is the utilize of IPO funds for the buyback, sources talked about rules bar any firm from doing so. The proceeds from the IPO can simplest be obsolete for the explicit reason it is miles raised for and that too is monitored.
Within the lately concluded meeting with analysts, Paytm’s top management highlighted that the firm is end to money waft skills, which in some unspecified time in the future shall be obsolete for its additional growth.
Sources talked about Paytm in all likelihood will utilize its pre-IPO money reserves for the buyback and within the near future, it will inaugurate the utilize of the generated money waft for its growth.
The firm has to this level not equipped any crucial facets of the buyback and measurement, and other crucial facets are typically disclosed after the board meeting.
There is theory about the buyback being at a tag below the IPO tag.
Furthermore, the regulation specifically prohibits side offers or negotiated offers for a buyback.
As a thumb rule, a firm undertakes a buyback programme when it has surplus money waft, which is sitting slothful, or if its shares are on hand at a tag below intrinsic price, and hence it be a tall time to retire capital.
In Paytm’s case, the buyback programme meets the necessities.
The firm again reiterated in its 2nd quarter results that it could well well attain profitability by the reside of September 2023.
Paytm’s most original numbers confirmed earnings surging by 76 per cent yr-on-yr and the losses narrowing by 11 per cent quarter-on-quarter.
Paytm reported a Rs 2,325 crore loss in 2021-22. It posted Rs 628 crore loss within the June quarter of 2022-23, which was once trimmed to Rs 588 crore within the September quarter.
Its Friday closing tag on the BSE at Rs 545 is lower than the IPO tag of Rs 2,150.

Source

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