Warren Buffett-Backed Paytm Stock Jumps 7% On Possible Buyback Plan

Shares of One 97 Communications Ltd., which operates Paytm, India’s largest digital payments provider, soared over 7% in intraday trade on Friday after the company notified a board meeting to consider a share buyback.

The board of the company backed by billionaire Warren Buffett’s Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) and Jack Ma’s Alibaba Group Holding (NYSE: BABA) is scheduled to meet on Tuesday to consider a proposal for a buyback of the fully paid-up equity shares of the company, it said in a statement to exchanges.

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“The management believes that given the company’s prevailing liquidity/financial position, a buyback may be beneficial for our shareholders,” One 97 Communications said.

Why It Matters: Shares of the company have lost over 60% since the beginning of the year and are down over 75% from the IPO price. A buyback could be a key factor in lifting the stock price, albeit only to a certain extent.

Other parameters like the maximum price and the quantum of the buyback will also likely impact the stock price movement going further. These details are expected to be revealed after the board meeting.

As of the quarter ended September, Alibaba.Com Singapore E-Commerce Private Limited holds a 6.26% stake in One97, while Antfin (Netherlands) Holding B.V. holds a 24.88% stake, according to regulatory filings. Berkshire Hathaway's BH International Holdings owns a 2.41% stake.

Alibaba and Ant Financial in May also sold their entire stake in the e-commerce subsidiary Paytm Mall for INR 42 crore.

Q2 Performance: Paytm’s second-quarter revenue rose 76% year-over-year to $234 million, driven by an increase in merchant subscription revenues, growth in bill payments and disbursements of loans through its platform. In its earnings release, the company stated it maintains the guidance of turning profitable by September 2023.

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