When One 97 Communications, the parent company of the fintech company Paytm, announced that it would sell its share of PayPay Corporation to SoftBank, its shares surged more than 3% to a new 52-week high of ₹1,007 on Monday, December 9.
The board of One97 Communications Singapore Private Limited, Paytm’s wholly-owned subsidiary, approved the sale of all of its Stock Acquisition Rights (SARs) in PayPay Corporation, Japan, to SoftBank Vision Fund 2 entity on Friday, December 6th, for net proceeds of JPY 41.9 billion, or ₹2,364 crore.
The business stated in an exchange filing that PayPay’s worth through this purchase is JPY 1.06 trillion, and as a result, PayPay SARs held by Paytm Singapore are valued at net proceeds of JPY 41.9 billion (after netting off the exercise cost of SARs). It is anticipated that the deal will be finalised in December 2024.
The business explained the reasoning behind the transaction, stating that Paytm Singapore had authorized the selling of SARs since it had significantly increased the company’s worth.
“The SARs sale net proceeds would fortify the consolidated cash reserves of One97 Communications Limited and help drive future business initiatives focused on maximising value creation for shareholders,” it further added.
On Monday, the price of Paytm’s stock rose for the fourth day in a row, gaining more than 9.5%. In the meantime, the stock has risen a staggering 226 per cent since its 52-week low of ₹310, which was reached in May of this year. The stock has produced an outstanding 49% gain in the past year as well.
After the Reserve Bank of India imposed limitations on Paytm Payments Bank Ltd (PPBL) earlier this year, Paytm’s stock experienced a steep selloff. This signals a stunning turnaround for the company’s price. Beginning on February 29, the RBI prohibited PPBL from taking deposits or top-ups for client accounts, wallets, or FASTags.
The stock has surpassed the recent target price hikes from brokerages UBS and Bernstein, and today’s rise has taken it past the 1,000 mark.
Global brokerage UBS kept its ‘neutral’ position on the company but increased its target price for Paytm to ₹1,000 from ₹490 per share late last month. Bernstein also increased its target price for Paytm from ₹750 to ₹1,000.
In its note, UBS emphasized that since the majority of cost optimization measures have already been completely realized, revenue will need to drive the next phase of growth.
The share price of Paytm was up 0.92 per cent on the BSE at 10.25 am, trading at ₹984.75 a share.
