New-age Tech Stocks This Week: Paytm Suffers As Fino Payments Bank, EaseMyTrip Emerge Victorious

While the overall Indian stock market sustained modest gains despite visible volatility, India’s new-age tech stocks witnessed another muted week. From Zomato to Delhivery, a majority of the new-age tech stocks were down between 1% and 15% on the BSE this week.

Having lost 14.9% of its share price value in the last five sessions, Paytm remained the biggest laggard for the second straight week. The lock-in expiry as well as a few other fundamental factors continued to batter the stock this week too.

Meanwhile, the pressure from lock-in expiry hit Delhivery, too, significantly this week, as its shares hit new record lows in two consecutive sessions. Falling since last week, Delhivery shares hit their all-time low at INR 317 this week. One of Delhivery’s major pre-IPO shareholders, CA Swift Investments, or Carlyle Group, sold 2.5% of its stake worth INR 607 Cr in a bulk deal on Monday.

However, Delhivery recovered slightly by the end of the week, ending Friday’s trading session at INR 331.75, up 0.5% compared to Thursday’s close. Overall, the stock fell 5.5% during the week.

Nykaa continued to remain under pressure even two weeks after the expiration of its stock’s lock-in period. Its shares fell 8.5% during the week, ending Friday’s trade at INR 176 on the BSE. Earlier this week, one of Nykaa’s major pre-IPO investors Lighthouse India Fund III once again sold its shares worth INR 335.7 Cr in a bulk deal.

It is pertinent to note that tech stocks across the world are currently in roiling waters and experiencing a lot of volatility due to the fears of a recession. Layoffs across big tech companies as well as tech startups have become more common than ever in 2022.

The AVP of technical research at Anand Rathi, Mehul Kothari, said that the downturn will continue for all the newly listed tech stocks and the stocks will not be able to outperform in the presence of the current headwinds. Further, due to layoffs at various tech companies worldwide, it is difficult to gauge what these tech startups are undergoing at this point, which will only make their stocks extremely volatile in the coming months.

Despite all the volatility and downward trend, PB Fintech, the parent entity of Policybazaar, Fino Payments Bank, and EaseMyTrip turned out to be the big winners among the new-age tech stocks this week. Remarkably, both Fino Payments Bank and EaseMyTrip grabbed the first two spots with their shares up over 36%.

Shares of EaseMyTrip jumped as much as 20% on Monday to hit their upper circuit on the BSE at INR 57.15, as they started trading ex-bonus and ex-split. By the end of the week, the traveltech stock shed some of its week’s gains and ended Friday’s session at INR 65, down 4.8% from Thursday’s close.

The benchmark indices, Nifty50 and Sensex, were up 1.1% and 1% this week and ended Friday’s trading session at 18,512.75 and 62,293.64, respectively.

“While most of the Asian gauges ended in the red, local benchmarks managed to eke out modest gains amid thin volumes,” observed Amol Athawale, the deputy vice-president of technical research at Kotak Securities. “Markets may react sharply on Monday, taking cues from the overnight US markets close on Friday,” he added.

Now, let’s dive further into the weekly performance of some of the listed new-age tech stocks from the Indian startup ecosystem.

The 12 new-age tech stocks under our coverage ended this week with a total market capitalisation of $26.92 Bn versus $28.03 Bn last week.

Paytm Shares Tank Further

Shares of Paytm fell 14.9% this week, making the fintech giant the biggest loser for the second straight week. The company’s shares fell in four consecutive sessions this week following the pressure from its lock-in expiry and brokerage Macquarie’s warning about an intensifying competition in the space.

However, on Friday, Paytm regained some momentum, ending the session at INR 464.8, up 5.4% from Tursday’s close.

In The News For:

• In a note this week, Macquarie said that Paytm would be at a higher risk than most other NBFCs/fintech players due to the entry of Jio Financial Services. “Jio Financial not only can offer attractive rates in merchant lending and digital unsecured lending markets, but also be reasonably competitive in the secured lending market eventually,” it noted.
• Last week, one of Paytm’s major pre-IPO investors SoftBank Group sold 2.9 Cr Paytm shares, or 4.5% of its stake, for INR 1,630.9 Cr in a bulk deal. As of now, investors are under stress about further sell-offs.
• The Reserve Bank of India (RBI) has asked Paytm Payments Services Limited to resubmit its application for payment aggregator licence. The directives from the RBI will have no impact on Paytm’s business and revenue, the startup said.
• Paytm spent INR 564 Cr as employee stock option (ESOP) expenses towards directors, key management personnel (KMPs), and relatives of the KMPs in H1 FY23.

Competition Watch:

• The demerger and public listing of Jio Financial Services pose one of the biggest competitive risks for Paytm. 
• Prosus-owned fintech major PayU Payments, which turned profitable in FY22, saw a 23% year-on-year (YoY) jump in its revenue from core payments vertical to $343 Mn.

It is pertinent to note that while the near-term headwind for Paytm is not over yet, many brokerages trust that the stock could outperform in the long term.

In a recent research note this week, Citigroup said that in the BNPL segment, Paytm is witnessing faster growth in active customer base versus PayU’s Lazypay.

“We acknowledge overhang risks from further selling by existing pre-IPO shareholders and that fintech is a competitive space but at these valuations, those risks are overdone,” the brokerage said, while maintaining a ‘buy’ rating on the stock.

The decent pullback Paytm shares witnessed on Friday could continue in the coming week, said Anand Rathi’s Kothari.

“Support for the stock is at INR 435. If this is not broken, then this pullback can take the stock towards INR 540,” Kothari said. He added that it’s a low-risk bet to go long. 

Kothari has recommended investors to stay away; however, said that the stock is a good opportunity for traders who are looking at a target of INR 500 or INR 540.

With the current market cap of $3.7 Bn, Paytm is now below its 2016 valuation of $4.8 Bn. 

PB Fintech Gains As Regulatory Environment Becomes More Favourable

PB Fintech, which runs insurtech startup Policybazaar and lending platform Paisabazaar, turned out to be one of the few outperformers among the new-age tech stocks this week. While PB Fintech’s gains were moderate to flat in the beginning of the week, the fintech major’s shares jumped almost 15% in the last two consecutive sessions, ending Friday’s trade at INR 460.2 on the BSE.

Overall, the company’s shares were up over 14% this week.

In The News For:

• Insurance regulator Insurance Regulatory and Development Authority of India (IRDAI) has issued new draft norms to remove caps on the payment of commission to insurance agents and intermediaries. This could benefit Policybazaar.
• Despite preliminary speculations, shares of PB Fintech shares were not significantly hurt even after the expiration of their lock-in period last week.

After IRDAI’s guidelines are implemented, there would be more clarity on the commissions received by Policybazaar from its insurance partners, opined brokerage Kotak Institutional Securities in a research note earlier this week. “This will provide more insights into its business and increase the Street’s conviction on the business model,” it said.

The stock has made a bottom somewhere near to the INR 400-INR 380 zone, said Anand Rathi’s Kothari.

“The risk-reward for the short-term trade is currently not favourable, but any dip towards INR 450 odd levels should be taken as a buying opportunity. On the upside, the stock is headed towards INR 500-mark in the next couple of months,” Kothari said.

Fino Payments Bank Second Biggest Gainer After EaseMyTrip 

Fino Payments Bank remained the second biggest winner this week, losing only to EaseMyTrip with a marginal difference. The fintech unicorn gained in the first four sessions of the week, with a major leap witnessed on Wednesday and Thursday, as its shares rose 36.5% in two days.

However, the stock shed some of its gains to end Friday’s session in the red. Fino Payments Bank ended the session at INR 255.25, down 2.5% compared to Thursday’s close.

The stock’s gains were partially led by Capri Global Holdings’ purchase of over 19 Lakh shares in two separate block deals worth INR 45.9 Cr.

In fact, Fino Payments Bank did not witness any major sell-off pressure even though its shares’ lock-in expired earlier this month. Besides, Capri Global Holdings, Graviton Research Capital, and NK Securities Research bought some stocks in bulk deals this week.

After Fino Payments Bank reported its Q2 FY23 results earlier this month, in which it posted a 75% YoY growth in its profit after tax (PAT) to INR 13.8 Cr, ICICI Securities noted that its earlier investments towards digital platforms have already started yielding positive results.

“Improving customer retention, strong traction in new customer acquisition and planned new product launches in the near term are likely to drive higher cross-sell going ahead,” the brokerage said.

The stock has witnessed more than 40% upside in just a week. “So, from here, the stock is expected to consolidate a bit,” Kothari said.

“Levels for the consolidation are INR 275 and INR 220. Nothing is actionable in the stock right now. Wait for that consolidation and then you can buy the stock again,” said Kothari.