Amid questions over whether it has the cash for the proposed buyback and if it is returning equity capital to shareholders, One97 Communications, the Paytm parent, on Monday shared a two-month operating performance update where it said there has been a sustained growth in its payments and loan distribution business.

The strong numbers disclosed by Paytm for October and November 2022 are seen as an attempt to counter the view that it does not have the cash flow for the share repurchase. Last week, Paytm said its board will meet on Tuesday to consider a share buyback.

“The management believes that given the company’s prevailing liquidity/financial position, a buyback may be beneficial for our shareholders,” Paytm had said. The company has cash and cash equivalent of over Rs 9,180 crore, according to its last earnings report.

A share buyback is generally used by companies to return excess cash to shareholders and it is also a tax-efficient instrument compared with dividends.

Proxy advisory firm Institutional Investor Advisory Services (IiAS) on Monday said in a note that a buyback signals that a company has strong cash flow generation, which is more than required to maintain its 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,’’ it added.

IiAS said that while the company’s cash as on June 30, 2021 was Rs 3,064 crore, it estimates that the cash burn during the third quarter of 2021-22 stood at Rs 469 crore.