Paytm Buyback Offer: Will Paytm buy back shares from the amount received in IPO? This news coming before the board meeting – paytm will not use amount received in ipo for share buyback
Meeting to be held on December 13
The meeting of the board of directors of the company is scheduled to be held on December 13 on the proposal to buy back the shares. In a communication sent to the stock exchanges on Thursday, the company said that the management believes that considering the current liquidity / financial condition of the company, the buyback will benefit our shareholders. At the end of last year, the company’s shares were listed on the stock exchanges. This year i.e. in 2022, Paytm shares fell 60 percent after widespread selling and raising questions about the company’s profitability.
Can’t use IPO proceeds for buyback
Sources said the rules bar any company from using the proceeds of an IPO to buy back shares. Paytm raised Rs 18,300 crore through an IPO in November last year. The company said last month that it would become free cash flow positive in the next 12 to 18 months. Sources indicated that the company is close to cash flow generation. This will be used for business expansion.
Cash before IPO can be used
Amidst talk that the company is using the IPO proceeds for buyback, sources said regulations prohibit any company from doing so. The proceeds from the IPO can be used only for the specific purpose for which the IPO was brought. It is monitored. Sources said that there is a high possibility that Paytm will use its pre-IPO cash for share buyback.
What is buyback offer?
A buyback offer is a corporate activity in which a company buys back shares from its shareholders. Usually, companies buy back shares at a higher price than the current market price. Buybacks are also of two types. Tender offer and open market offer. Shares of Paytm had closed at Rs 545, up 7.20 per cent or Rs 36.60, on the BSE on Friday.
(with PTI inputs)