Paytm share buyback: Many on the street remain wary despite Rs 850 crore buyback announcement

The company said it is ahead of its previously-stated plans to achieve EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization) before ESOP (Employee Stock Ownership Plan) costs profitability by the quarter ending September 2023.

Paytm also reiterated that proceeds from the IPO will not be used for this buyback.

Founder and CEO Vijay Shekhar Sharma said there is clear business momentum over the last year and the company is ahead of its plans.

"I believe that a buyback at this stage will be immensely beneficial for our stakeholders and will drive long-term shareholder value," Sharma said.

According to SEBI's rules, a company can announce a buyback of 25 percent of net worth through the tender route and 15 percent of net worth if the buyback is through the open market.

As of the September quarter, the company had Rs 9,182 crore cash on the books. 69 percent of the IPO proceeds or close to 5,600 crore still remain on Paytm's books. Ex-IPO proceeds, Paytm has cash worth Rs 3,582 crore on its books.

Digant Haria, Co-Founder of GreenEdge Wealth called the buyback announcement a non-event, adding that the purpose of the same remains unclear. Haria further told CNBC-TV18 that investors should be wary of buying into Paytm as its valuations are not very cheap. He also warned that it is possible that Paytm will not even be able to buy the entire amount earmarked for the buyback from the Open market.

Morgan Stanley too has maintained its equalweight rating on Paytm with a price target of Rs 695.

Shares of Paytm fell as much as 2 percent in early trading and are currently down 1.2 percent at Rs 533.