Paytm - Buyback To Clear Cloud On Looming Concern; Rerating On Cards: Dolat Capital

Dolat Capital Report

One 97 Communications Ltd. has announced that its board will meet on Tuesday, Dec 13, 2022 to consider a buyback. Paytm has 649 million shares outstanding, and has net cash and investment balance of ~Rs 92 billion as of Sept-22.

We believe following factors would have led to this decision:-

1. business traction both on growth and profitability is trending faster than what was anticipated at the time of IPO,

2. annualised burn rate at current rate is less than $75 million,

3. to turn free cash flow positive by H1 FY24 and adjusted Ebitda positive ideally by H2 FY23 (accumulated 30% of incremental revenues into incremental Ebitda on last twelve months basis, while contribution margins stands at 44% - suggesting further room for improvement) and

4. lack of opportunities in organic (exited Insurance joint venture, no plans to create non-banking financial company or internal book of credit) and inorganic front.

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