Paytm surges 7% on share buyback plan; board to meet on Dec 13

Shares of One 97 Communications, a digital financial services firm which operates under the brand, surged nearly 7 per cent to a high of Rs 542.90 in intra-day trades on Friday after the company announced its plans to consider share buyback.

According to a release issued by the company to the BSE, One 97 has scheduled its board meet on December 13, Tuesday, to consider the share buyback proposal.

The management believes that given the Company’s prevailing liquidity/ financial position, a buyback may be beneficial for our shareholders, the release stated.

At 09:30 AM, Patym traded 4.5 per cent higher at Rs 531.50 with trades of around 3.37 lakh shares on the BSE. In comparision, the S&P BSE Sensex was up 0.1 per cent at 62,615.

At the current market prices, trades at a massive 75 per cent discount to its IPO price of Rs 2,150 per share. Post the company’s Rs 18,300 crore IPO in November 2021, the stock has been on a downward spiral, and hit an all-time low of Rs 439.60 on November 23, 2022 on the BSE.

Given the sharp fall, analysts believe the stock is turning favourable from risk-reward perspective. Moreover, with the management’s focus on profitability, and the target of turning free cashflow (FCF) positive in 12-18 months, analysts are confident that the company will end cash burn in the next 4-6 quarters. READ MORE

Last month, Japanese conglomerate SoftBank Group sold 4.5 per cent stake in via bulk deal on 17 November 2022. As of 30 September 2022, SoftBank held 17.45 per cent stake in Paytm through SVF India Holdings (Cayman).

Meanwhile, BOFA Securities Europe SA bought 50,26,428 equity shares (0.77 per cent equity) of Paytm. Morgan Stanley Asia Singapore PTE bought 60,03,468 equity shares (0.93 per cent equity) and Societe Generale – ODI bought 70,85,227 equity shares (1.09 per cent equity), as per the exchange data.

On the earnings front, One 97 Communications Q2 net loss widened to Rs 588.80 crore for the quarter ended Septmeber 2022 as against a loss of Rs 461.20 crore in the corresponding quarter a year ago. Total income, however, grew 36 per cent YoY to Rs 1,490.20 crore from Rs 1,095.60 crore.

Technical View

Bias: Marginally Positive

Target: Rs 596

Support: Rs 519

Resistance: Rs 551.70

After almost two months, shares of Paytm were seen trading above the 20-day DMA (Daily Moving Average) in trades today, which is a marginally positive sign. However, having said that, last time i.e. in October when the stock moved above the 20-DMA, it barely managed to sustain above it for a week or so.

For now, the 20-DMA at Rs 519 is likely to act as an immediate support for the stock. On the upside, the stock has near resistance at its trend line at Rs 551.70. As and when the stock overcomes this hurdle, it will look to fill the gap created between Rs 565 to Rs 596.

Select momentum oscillators like the DI (Directional Index) and the 14-day RSI look favourable on the day chart.

(With inputs from Rex Cano)

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