Everything you need to know about Paytm buyback

Trading Announcements
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On 13th December, 2022, Paytm announced that its Board of Directors have approved buyback of equity shares aggregating up to Rs. 850 crores through the open market buyback route for not more than Rs. 810 per share. You can check the announcement here

What is an open market offer?

There are two types of buybacks: tender offer and open market offer. Companies can choose either of these methods to buyback shares from their shareholders.

Open-market offer: The company can buy back its shares by actively buying from sellers on the exchange. The buyback period is mentioned in the buyback offer, and it can last for months to ensure that there is no significant price movement due to the buying activity.

Tender offer: The company makes an offer to buy back its shares at a particular price (offer price) at which the shareholders can tender, i.e., sell their shares.

How do I offer shares in open market buyback?

Giving shares directly to the company is not possible in open market buyback. Unlike tender offer, where you can offer shares directly to the company. In an open market buyback, the company actively buys the shares on stock exchanges.

At what price does the company buy back the shares in the open market?

In open market buyback, the company buys back the shares at prevailing market price. However, the company can only buy back shares at the maximum price it has set. In case of Paytm, the company can buy back the shares at only Rs. 810 or lower, above that, the company cannot buy the shares.

How does the taxation work for open market buyback?

The company buying back the shares in a tender offer or open-market offer pays all taxes on the buyback offer. Buyback transactions are shown separately in the Console tax P&L, and there won’t be any additional tax liability in such a case.

You can keep track of all the latest Buybacks, Takeovers, Delistings on Bulletin

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This is only if it’s tender offer. For open offers investors won’t get any tax benefit. Please correct if am wrong.

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This is applicable for open-market buybacks as well. The company buying back the shares in a tender offer or open-market offer pays all taxes on the buyback offer.

During the open market buyback, if you place a sell order and if the shares are bought by the company, you will get email from exchange with details about the quantity bought by the company.

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Oh okay. I wasn’t aware of this. Thank you so much. :+1:

Logically it’s not making sense to me for now. But Nevermind. Not everything in tax makes sense. :grimacing::grimacing:

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For all you know, the company may not end up buying the shares or buying very little.

This whole buyback episode seems a ploy to prop up the stock price. How can an operationally loss-making entity think of using its reserves to buyback equity? If anything, they should be looking to raise additional funding until they’re operationally profitable.

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They cannot show profitability, so doing unnecessary drama to try and prop up price.

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If I was a fraud, i would have sold all equity at 2150 and bought back at 800 - a ROI of 62% and taken the company back to private.

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you dont want to do that, then everyone will know for sure you are a fraud. What you do should be subtle and have an element of plausible deniability.

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If i do this locally in a shop - i will be arrested

If i do it online - its SEBI approved and 100% legal & legitimate.

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Really not that easy sir, vedanta tried to do that when it went to lows, but couldnt.