Paytm must explain cash needs: IIAS Proxy advisory firm IIAS has said the board of One97 Communications, owner of Paytm, should explain how it can manage with less cash after the buyback, when just a year back it raised money to fund its growth strategy. “We expect that the board raised Rs 8,100 crore in net IPO proceeds after factoring its existing cash. Therefore, its growth strategy a year ago required funding support that was in excess of the IPO proceeds. What has changed for the board to believe that its current liquidity is sufficiently in excess that it can be returned to shareholders?” the firm wrote in a note. Also read: Sebi may bring valuation norms for AIFs The board of One97Communications meets on Tuesday to discuss the buyback. On Monday, the Paytm stock closed lower by 3.1% at Rs 528.10, way below its IPO price of Rs 2,150. The company, backed by Ant Group and Softbank, had cash and equivalents of Rs 9,180 crore at the end of September. Buybacks are generally used as tax-efficient instruments to return excess cash to shareholders. They signal that the company is generating strong cash flows that are more than required to maintain the growth trajectory. “In Paytm’s case, the company continues to report cash losses annually. Therefore, the buyback is essentially a return of equity capital to its shareholders,” analysts said. Also read: Paytm’s loan disbursals surge 374% on-year, loan volume jumps 150% in Oct-Nov; share price still in red today IIAS analysts said it was unclear if the size of the buyback would be sufficiently meaningful to move the needle. Unless the buyback price announced by One97 Communications is higher than the IPO price of Rs 2,150, the buyback would favour pre-IPO shareholders and employees. Employees have been issued stock options at a significant discount to market price. The founder, Vijay Shekhar Sharma, was granted 21 million stock options at Rs 9 in FY22, IIAS pointed out. In contrast, those shareholders who bought shares in the IPO at a price of Rs 2,150 would view the buyback unfavourably.
Retail inflation in milk was reported at 8.85% in May 2023. The milk inflation has remained elevated at over 6% since August 2022. Despite India being the largest milk producer since 1998, the commodity has been the second biggest factor after cereals such as rice and wheat in driving up retail inflation in the last fiscal.
Milk has the second highest weight in the food and beverages basket of the consumer price index at 6.61%, a notch lower than cereals and products with a 9.67% weight. Organised players, including Mother Dairy and Amul, hiked prices multiple times in the last one year citing higher fodder cost, robust demand and some impact due to reports of lumpy skin disease.
Industry sources said feed cost, which has a share of more than 65% in the cost of production of milk, has increased to Rs 20/kg from Rs 8 a year ago. The finance ministry in April had attributed the elevated milk inflation to a demand supply mismatch and said it could be one of the factors apart from volatile international crude oil prices and constrained supplies of milk would influence the country’s inflation trajectory.
“Milk production has been impacted by a lumpy skin disease infecting millions of cattle in late 2022,” the ministry said in the monthly economic review, adding that the vaccination drive against the disease is expected to curb the spread and immune the cattle against the skin disease.
According to official data, currently India is the world’s largest milk producer, and has a share of 23% in global milk production. For the first time in decades, the country’s milk production is likely to have stagnated in 2022-23 due to Lumpy Skin Disease in cattle across several states and the lagged effect of Covid-19 in the form of stunting of the animals, a senior official with department of animal husbandry and dairying recently had stated. The milk production was estimated at 221 million tonne in 2021-22.