BENGALURU Paytm's stock rose over 7 per cent on Friday after it announced it plans to consider a share buyback, but analysts warned that it wouldn't bring long-term relief to investors as concerns about the Indian firm's slow path to profitability remained.
Late on Thursday, Paytm said that it will consider a buyback of shares on December 13, and that it thinks the move will be beneficial for shareholders given the company's prevailing liquidity and financial position. Last month, Paytm said it would become a free cash flow positive in the next 12 -- 18 months.
Chokkalingam G, founder of Equinomics Research Advisory Pvt Ltd, said Friday's stock surge was an opportunity to exit the counter, because the company is yet to make profits, but it is in a hurry to announce a buyback.
The company always takes decisions keeping the long-term interests of our shareholders in mind, even though some people criticized its plans on Twitter. The buyback plans come as several technology stocks in India are facing pressure due to rising interest rate environment and concerns over valuations. SoftBank-backed Indian e-commerce firm Snapdeal said on Friday that it will pull the plug on its $152 million IPO plans due to unfavorable market conditions.
According to Shriram Subramanian, managing director of InGovern Research Services, Paytm's investors should focus on its long-term fundamentals, according to Shriram Subramanian, managing director of Bengaluru-based corporate governance advisory firm InGovern Research Services.
Subramanian said investors should look at how the company can make money from their business, the path to profitability and when will they become profitable instead of focusing on the buyback.