Paytm Board Drops Bonus Issue, Approves Rs 100 Crore for Paytm Money

One97 Communications, the parent company of Paytm, has decided to shelve its proposed bonus issue for over 7.5 lakh small shareholders. The board, which met on Monday, chose to prioritise growth and profitability over the shareholder reward.

The decision comes as a surprise to many retail investors who were expecting a bonus issue to be announced. The company's stock had been in focus ahead of the board meeting.

Q1 Results: Profit Jumps 79%

Alongside the bonus issue decision, Paytm announced its Q1 FY27 results. The company reported a net profit of Rs 220 crore, a sharp 79% increase from the previous quarter. This marks the fifth consecutive quarter of profitability for the fintech major.

Revenue from operations rose by 28% year-on-year, driven by growth in payment services and loan distribution. The company's focus on high-margin businesses appears to be paying off.

Why the Bonus Issue Was Shelved

The board concluded that retaining capital for reinvestment would yield better long-term value than distributing shares. Paytm is currently investing heavily in its financial services arm, Paytm Money, and expanding its merchant network.

Sources close to the development indicated that the management wanted to conserve cash for strategic acquisitions and technology upgrades. The bonus issue, while popular with retail shareholders, would have diluted earnings per share.

Rs 100 Crore for Paytm Money

In a separate move, the board approved an investment of Rs 100 crore into Paytm Money, the company's wealth management platform. This capital will be used to launch new mutual fund schemes and expand insurance distribution.

Paytm Money has been a key growth driver, with assets under management crossing the Rs 10,000 crore mark last quarter. The fresh infusion is expected to help the unit compete with established players like Zerodha and Groww.

The company is also testing a new feature that allows users to invest in US stocks directly from the app, according to industry sources.

Market Reaction

Paytm shares traded flat on Monday, closing marginally lower after the announcements. Analysts had mixed reactions: some viewed the bonus issue shelving as a sign of prudent capital management, while others called it a missed opportunity to reward loyal shareholders.

Jefferies maintained a 'buy' rating on the stock, noting that the Q1 profit beat estimates. The brokerage highlighted that Paytm's operating leverage is finally kicking in after years of heavy spending.

Kotak Institutional Equities, however, flagged that the decision to skip the bonus could weigh on retail sentiment in the near term.

Paytm will now hold its annual general meeting next month, where shareholders are expected to vote on the investment plan for Paytm Money. The company has not indicated any future timeline for the bonus issue.