Bloodbath In New-Age Tech Stocks Amid Broader Market Crash, Paytm Only Gainer This Week

The Indian equities market continued its downward spiral this week. After touching their all-time highs at the end of September, benchmark indices have fallen over 7.50%. In line with this slump, Indian new-age tech stocks saw a bloodbath this week. 

Of the 28 new-age tech companies under Inc42’s coverage, 27 saw their share prices fall in a range of 1.38% to just under 20% this week. Paytm was the only company to end in the green this week. The stock rose 2.71% to close the week at INR 744.60. The upswing came as a result of the fintech giant getting the National Payment Corporation of India’s (NPCI’s) approval to onboard new customers for its UPI offering.

A number of new-age companies – Zomato, Go Digit, Fino Payments Bank, and ixigo – declared their September quarter financials this week and ended the week in the red. The biggest loser of the week was IndiaMART InterMESH. The B2B marketplace’s shares sank 19.20% to INR 2,438.35. 

In the broader market, Sensex fell 2.01% from last week to 79,402.29. Nifty 50 declined 2.86% to end at 24,180.80. 

Commenting on this, Vinod Nair, head of research at Geojit Financial Services, said that the bearish investor sentiment is due to geopolitical tensions, sustained selling by FIIs, and lack of triggers in the domestic market.

“We expect the consolidation to continue in the short term; a reversal in trend will depend on a slowdown in FIIs’ selling intensity and the outcome of the US presidential election. The domestic macros are largely favouring the market with the unveiling of strong PMI data and the RBI reiterating the economic growth forecast for FY25. Moderation in valuation, pickup in earnings in H2FY25, and an expectation of a rate cut by the RBI in 2025 will provide support to the market,” he said.

Meanwhile, Prashanth Tapse, senior VP of Mehta Equities, said that subpar Q2 results added to the selling pressure.

“The dismal Q2 earnings so far has aggravated the investors’ woes, while persistent FII selling continued to create havoc in the market. Despite the Chinese stimulus announcement, falling crude oil prices is an indication that major economies continue to feel the slowdown pinch,” he said.

Now, let’s take a deeper look at the performance of the new-age tech stocks this week. 

The total market capitalisation of the 28 new-age tech stocks under Inc42’s coverage declined to $74.41 Bn at the end of this week from $77.56 Bn last week.

Paytm Gets NPCI Boost

Fintech major Paytm continued on its long road of recovery despite broader market pressure. Shares of the company ended the week at INR 744.60, up 2.71% from last week. With this, the market capitalisation of Paytm stood at $5.63 Bn at the end of the week as against $5.48 Bn at the end of the previous week. 

The company posted a consolidated profit after tax (PAT) of INR 930 Cr in Q2 FY25 as against a loss of INR 292 Cr in the year-ago period, largely due to the INR 2,048 Cr sale of Paytm Insider to Zomato. However, revenue from operations fell 34% to INR 1,1660 Cr in the reported quarter from INR 2,519 Cr in Q2 FY24.

Paytm shares fell over 6% during the intraday trade after the company declared its financial results on October 22. However, the fortunes reversed as the Vijay Shekhar Sharma-led company received the NPCI’s nod to onboard new UPI users. Following this, the company said it has begun onboarding new customers via its app.

Meanwhile, Paytm also explained its future plans for the business along with its Q2 results. The company said it has begun its experiment with a default loan guarantee (DLG) for merchant loans. It announced its first FLDG agreement with SMFG India Credit. 

“DLG costs are going to be paid back to us, hence translating to higher revenue. So, in a way, the business won’t be requiring any additional equity capital or investment because of this rotation,” CEO Sharma said in the post-earnings call. 

Paytm also said that it has started an experiment with running audio ads for Meesho, Coca Cola, Mondelez and Dabur on its PoS device. 

Brokerage Citi increased its price target (PT) for Paytm to INR 900 from INR 440 earlier. The brokerage said that the regulatory risks for Paytm now appear “largely behind” and the company has announced plans to offer DLG in accordance with the RBI’s guidelines.

Meanwhile, Jefferies maintained a ‘Hold’ rating on Paytm with a target price of INR 700 per share. It noted that Paytm’s Q2 EBITDA loss decreased due to a 1% quarter-on-quarter reduction in costs, along with a recovery in the top line. The brokerage is also positive about DLG, and said that it could bring Paytm closer to EBITDA breakeven.

Zomato Delivers Another Profitable Quarter 

Shares of the foodtech major ended 1.38% lower from last week to end at INR 253.85. With the decline, its market capitalisation stood at $26.67 Bn as against $26.72 Bn in the previous week. 

The company was in the news this week for the following reasons:

• Zomato posted an increase of 389% in its net profit in the September quarter to INR 176 Cr from INR 36 Cr in the year-ago quarter. However, profit declined 30% from INR 253 Cr in the preceding quarter. Operating revenue increased 68.5% to INR 4,799 Cr in Q2 FY25 from INR 2,848 Cr in the year-ago period.
• The company granted nearly 20 Lakh equity shares to eligible employees under various employee stock option plans (ESOPs).
• The foodtech major received the approval of its board to raise up to INR 8,500 Cr via qualified institutional placement (QIP). CEO Deepinder Goyal said that the capital will strengthen Zomato’s balance sheet.
• Zomato will be acquiring an 8% stake in innovative kitchen appliances maker Byondnxt.
• The company confirmed on October 24 that it has hiked its platform fee for the fourth time this year to INR 10 ahead of the festive season.

Following the upbeat results, brokerages maintained their positive outlook on Zomato. Axis Securities gave Zomato a ‘Buy’ rating and increased the PT to INR 350 from INR 280. The brokerage believes that a strong brand value and increasing demand for B2C business and quick commerce has placed Zomato in a favourable position for growth in FY25 to FY26.

“From a long-term perspective, it is believed that Zomato has built a resilient business model by securing multiple strategic verticals and delivering broad-based growth. The company has also established robust capabilities that will enable it to gain market share moving forward. Strong brand value and increased market share will enhance revenue visibility,” the brokerage said. 

Meanwhile, ICICI Securities also maintained its ‘Buy’ rating for Zomato and gave it a PT of INR 300. 

IndiaMART Falls After Q2 Results

Despite doubling its net profit in Q2 FY25, shares of IndiaMART fell 19.20% to end the week at INR 2,438.35. Its market capitalisation declined to $1.73 Bn from $2.14 Bn from last week. 

IndiaMART reported its Q2 numbers on October 19. Its profit nearly doubled to INR 135.1 Cr from INR 69.4 Cr in the same quarter previous year. Revenue from operations jumped 18% to INR 347.6 Cr during the quarter under review from INR 294.6 Cr in Q2 FY24. 

The company’s unique business inquiries in Q2 FY25 stood at 28 Mn, while revenue collected from customers increased 6% YoY to INR 356 Cr during the quarter. 

However, Jefferies downgraded the company from ‘Buy’ to ‘Underperform’, citing weak subscriber growth, and reduced the PT to INR 2,540. The company’s paying subscriber grew about 4% YoY during the quarter.

Jefferies said that while the company reported in-line Q2 results, subscriber growth remained weak, leading to a moderation in collections growth. The brokerage also forecasted collections growth for IndiaMART to range between 10-15% unless subscriber additions improve. 

Meanwhile, Motilal Oswal maintained its bullish outlook on the stock but cut its PT to INR 3,500. “We continue to see IndiaMART as a key beneficiary of the technology adoption by India’s MSME universe and a shift to a formalised ecosystem. We believe that the company is poised to drive significant value, owing to its industry leading position in the segment,” the brokerage said.