Should you bet on new-age tech stocks after a mixed Q2?

Consumer-focused tech stocks have witnessed a sharp selloff since their stock market debut. Global tech-selloff, amid withdrawal of liquidity and rising treasury yields, coupled with high valuations butchered returns. 

These companies, now, face another blow.

Lock-in period for pre-IPO investors will end this month for a number of companies, potentially supplying $14 billion worth of shares.

This included companies like PB Fintech and FSN e-commerce-owned Nykaa, whose lock-in period ended yesterday. 

Meanwhile, shares of Paytm and Delhivery will brace for the impact on November 15 and 19, respectively.

These stocks have slumped up to 30% over the past one month amid concerns that huge supplies from large investors may take the stock prices to new lows.

Analysts, too, warn that expensive valuation and stiff competition in a weak macro environment offer limited upside in new-age tech companies.

Independent Market Analyst Ambareesh Baliga says, Nykaa trades expensive due to Rs 52,000 cr market-cap. Nykaa’s fashion venture looks risky. Paytm facing stiff competition from conglomerates. Don’t see steep correction for Paytm from here on; the upside remains limited. 

In the July-September quarter of FY23, Nykaa’s net profit jumped 344 per cent year-on-year to Rs 5.2 crore. Revenue from operations, too, climbed 39 per cent YoY to Rs 1,231 crore.

PB Fintech, the parent entity of insurer-tech platform Policybazaar, on the other hand, narrowed its net loss to 187 crore rupees in Q2FY23, as against a loss of 204 crore rupees last year.

Paytm’s net loss, however, widened to Rs 571 crore in Q2 over the previous year, while revenue jumped 76%.

A steeper correction down the road could make these stocks a favorable bet.

Speaking to Business Standard, AK Prabhakar, Head of Research, IDBI Capital says, further correction to make Nykaa attractive. Another 50% fall likely in Nykaa due to the four-digit P/E ratio. Nykaa’s 39% YoY growth implies low valuation. Paytm still booking losses; suggest staying away. 

Since their debut at the bourses shares of Nykaa, Paytm, Zomato, CarTrade Tech, PB Fintech and Delhivery have crashed up to 68%.

Analysts expect related stocks to see a turnaround performance once these loss-making companies start delivering growth and sustaining profitability.

As regards today, macro reports, global cues, rupee movement, foreign flows, and crude oil prices will dictate market trends.

Besides, India Inc’s quarterly earnings will continue to be tracked as companies like LIC, M&M, Adani Power, Hindalco Industries, HAL and Delhivery will report the July-September quarter results on Friday.