Is it time to add Paytm, Nykaa, Zomato to your portfolio?

The recently-concluded June quarter of the current fiscal year may prove to be an inflexion point for new-age tech companies.

Zomato, Nykaa and Paytm reported sharp recovery in their respective operating metrics, suggesting the companies could be embarking on their growth journeys.

NITIN BHASIN, CO-HEAD AND HEAD OF RESEARCH, AMBIT INSTITUTIONAL EQUITIES says new-age companies showcasing road map to profitability. Policybazaar, Zomato seeing profits in core segments. Aggressive acquisition of new ventures may mask overall profitability. Companies like IndiaMART diluted margin to chase growth. Others like Nazara Tech using balance sheet to expand aggressively.

Among key profitability metrics, Zomato’s gross order value of food delivery jumped 42% year-on-year in Q1, aided by growth in volume, and average order value. 

The company also broke even on an adjusted Ebitda basis during the quarter.

Paytm’s gross merchandise value, meanwhile, more than doubled to 3 trillion rupees from 1.5 trillion rupees a year-ago.

Nykaa reported 47% YoY growth in gross merchandise value with consolidated GMV reaching 2,490 crore rupees during the quarter.

Nazara Technologies also clocked 70% jump in its consolidated revenue, with all individual business segments staying in the green.

Analysts believe sustainable profitability and recovery in stock prices may be some time away. They also differ on whether it is the right time to own these stocks.

UR Bhat, Co-Founder and Director of Alphaniti Fintech, for instance, says “With valuation froth now trimmed, new-age technology companies are here to stay. They offer a certain level of convenience to consumers, which are being appreciated. While there is space for these companies to coexist, valuations will now have to be more reasonable.”

Others like Independent Market Analyst Ambareesh Baliga weigh profitability over valuations. He asks should one pay a premium for growth when there is no profitability? Profits need to grow and not remain stagnant in single digits, he says. Nykaa is still expensive, Zomato stock entering ‘fair value’ zone and profitability still some time away, he says. Paytm numbers came as a surprise; growth remains key monitorable.

Baliga is bullish on Zomato at lower levels; believes Nykaa is overpriced; and considers Paytm to be a dark horse if there is consistency in its earnings. Markets shall remain closed today on account of Muharram holiday.