A majority of new-age tech stocks ended lower this week, with Delhivery, Nazara Technologies, Zomato, PB Finetech, and Paytm being the only gainers
DroneAcharya was the biggest loser, crashing almost 6%, as the overall market witnessed a lacklustre week
In the broader equity market, Sensex fell about 1.34% to 59,655.06 this week while Nifty50 declined 1.1% to 17,624.05
Indian new-age tech stocks saw another mixed week due to a lacklustre performance of the overall stock market amid fears of further rate hikes by the US Fed in its upcoming meeting early next month.
A majority of new-age tech stocks fell this week, with Delhivery, Nazara Technologies, Zomato, PB Finetech, and Paytm being the only gainers. Shares of Delhivery jumped almost 10% to emerge as the biggest gainer this week, while others rose in the range of 0.5% to 5%.
Meanwhile, DroneAcharya was the biggest loser this week, crashing almost 6%. Other new-age tech stocks, including Nykaa, EaseMyTrip, Tracxn, and IndiaMart InterMESH, fell between 0.1% and 4%.
IT stocks are under pressure in the overall market following the disappointing performance of Infosys and TCS in Q4 FY23. The results of Reliance Industries Ltd (RIL) for the quarter and year ended March 2023 are expected to drive the performance of the overall market in the coming week. RIL’s net profit increased 18.3% year-on-year (YoY) to INR 21,327 Cr in FY23, while its gross revenue rose 2.8% to INR 2.39 Lakh Cr.
In the broader equity market, Sensex fell about 1.34% to 59,655.06 this week while Nifty50 declined 1.1% to 17,624.05. On Friday, the indices remained almost flat.
“Markets struggled for direction in a lacklustre and an uninspiring session amidst looming fears of economic recession following hawkish signals from the US Fed. Risk aversion was again the preferred theme,” said Prashanth Tapse, senior VP (research) at Mehta Equities, about Friday’s session. He added that the market is likely to be choppy and volatile in the coming days.
Now, let’s dig deeper into analysing the performance of some of the new-age tech stocks this week.
The 14 new-age tech stocks under Inc42’s coverage ended the week with a total market capitalisation of $26.99 Bn as against $26.44 Bn last week.
Delhivery Emerges As The Biggest Winner
Shares of Delhivery jumped 9.9% on the BSE this week. The shares surged 6% on Friday alone, closing the week at INR 357.35. The rally comes a week after Tiger Global’s Internet Fund III offloaded a 1.6% stake in Delhivery for the fifth time.
Brokerage Bernstein initiated its coverage of the logistics unicorn’s stock this week with a ‘market-perform’ rating, ahead of its Q4 results. Having recognised the near-term hurdles for the company, the brokerage said it is positive about Delhivery’s long-term growth prospects.
Bernstein has a price target (PT) of INR 360 on the Delhivery stock, which implies an upside of 0.7% to the stock’s last close.
“After three-quarters of weak performance, we expect a recovery in both growth and margins as the challenges that Delhivery faced in PTL (partial truckload) and ecommerce segments are slowly getting resolved,” said the brokerage.
However, Bernstein also noted that Delhivery had shown significant promise of growth ahead of its IPO but the growth and margin disappointments suddenly after the IPO are a case of poor execution.
“To that extent, this serves as a red flag when evaluating the company. This will heal only after a string of successes,” it said.
The brokerage stated that Delhivery’s market share in ecommerce shipments dropped to 21.5% in FY23 from 23% in FY22. The startup has not yet filed its operating performance report for Q4 and FY23.
This week, Delhivery also announced that its chief customer experience officer Abhik Kumar Mitra has stepped down from his position.
Shares of Delhivery have fallen almost 40% since its listing last year but are trading 5.6% higher year to date.
Zomato’s Cost-Cutting Initiatives Continue
Shares of foodtech major Zomato continue to rally amid the cost-cutting initiatives being undertaken by the company to reach profitability. After gaining 2.3% last week despite the chaos at Blinkit, the company’s shares rose over 4% this week.
Shares of Zomato rose 3.4% on Friday alone to end the week’s last trading session at INR 56.03 on the BSE – a level last seen in early January this year.
In The News For:
- Following the strike of Blinkit delivery executives in the Delhi-NCR region last week, which led to temporary closure of hundreds of its dark stores for days, Zomato said that the incident would have no material impact on its operations/ financial performance.
- Zomato and RBL Bank discontinued their partnership for co-branded Edition credit cards, which offered 5%-10% cashback to users on all spending via Zomato and Blinkit apps.
While Zomato is trying to cut costs to reach its profitability targets, brokerages expect the performance of the company’s food delivery vertical to be subdued in Q4 FY23.
In a recent research note, JM Financial said that it expects a 4.3% sequential decline in Zomato’s gross order value (GOV) for food delivery in Q4 given the adverse impact of inflationary pressure on discretionary spends, increase in dine-in consumption, and the company’s focus on profitability.
“Despite pressures on GOV growth, we expect food delivery contribution margin to remain stable at 5.1% while Blinkit contribution margin could improve 50 bps sequentially to 4.0%,” the brokerage said.
On a similar note, ICICI Securities also said that Zomato’s food delivery GOV is expected to remain flat sequentially in Q4 as it is seasonally weak quarter and online consumption fatigue.
Meanwhile, Motilal Oswal initiated its coverage on Zomato with a ‘buy’ rating but said that it views the acquisition of Blinkit as an additional risk for the startup and the high attrition at senior management level as a concern.
“With Zomato’s food business recording EBITDA breakeven in Q1 FY23, we expect the company to turn profitable over FY25. Continued spends due to elevated competitive intensity from Swiggy should weigh on Zomato’s operating costs in FY24, making it difficult to breakeven,” the brokerage said.
Paytm Gets Thumbs Up From Brokerages
Shares of fintech giant Paytm have been on an upward trend over the last month, rising over 17% since mid-March. Ahead of the startup’s Q4 results, multiple brokerages have reiterated their positive stance on Paytm.
Goldman Sachs said in a research report this week that it expects Paytm to report robust March quarter earnings, with revenue growth of 49% YoY and second consecutive quarter of positive margins.
Reiterating a ‘buy’ rating on the stock, the brokerage said it sees Paytm as the most profitable company within its India internet coverage by FY25.
Motailal Oswal also initiated coverage on Paytm this week saying that the company would reach overall EBITDA breakeven by FY25.
The brokerage has a ‘buy’ rating on the stock and sees its operating revenue at INR 7,850 Cr in FY23.
Shares of Paytm rose 0.5% this week, ending Friday’s session at INR 654.70 on the BSE.