Rampage Continues For New-Age Tech Stocks — Delhivery, Nykaa, Policybazaar Hit Record Lows

The Indian new-age tech stocks continued to remain under severe pressure for the second consecutive week despite a persisting bullish sentiment in the overall stock market. 

A severe plunge was noticed in stocks across segments as beauty ecommerce giant Nykaa, logistics unicorn Delhivery, and insurtech major Policybazaar hit their record lows, falling 5.9%, 31%, and 14.3% on the BSE, respectively, on a weekly basis.

PB Fintech, Policybazaar’s parent entity, had declined over 9% last week as well. This week, the stock hit its all-time low at INR 378.5 ahead of its impending IPO lock-in period expiry.

An analyst told Inc42 that besides the pressure on the stock due to the mandatory lock-in expiry, other factors, such as the Insurance Regulatory and Development Authority of India’s (IRDAI’s) decision to launch Bima Sugam portal could be playing a role in the slump.

Since Policybazaar’s debut on the Indian stock market in November last year, its shares have fallen as much as 67% in a year.

While the picture was largely grim for the new-age tech stocks, a few of them managed to have a northbound journey. Shares of CarTrade Technologies ended the week up 2.5% at INR 608.4 on the BSE. Separately, on Friday, the startup also reported a net profit of INR 5.58 Cr in Q2 FY23 versus INR 35.35 Cr in losses last year.

IndiaMart InterMESH, Fino Payments Bank, and EaseMyTrip also ended the week slightly higher than the previous week.

Besides CarTrade, IndiaMart and Nazara Technologies reported their Q2 financial results this week. IndiaMart’s consolidated net profit fell 16% year-on-year (YoY) to INR 68.4 Cr in the quarter. On the other hand, Nazara reported a 13.7% YoY increase in its net profit to INR 17.4 Cr in Q2.

Meanwhile, a new tech stock Tracxn made its market debut. The 2013-founded market intelligence SaaS startup had a tepid debut as its stocks got listed at a premium of 3.75% at INR 83 apiece on the BSE and a premium of 6% at INR 84.50 on the NSE.

Overall, the benchmark indices NSE Nifty50 and BSE Sensex were up 2.3% and 2.4% this week, ending Friday’s session at 17,576.3 and 59,307.15, respectively.

“Despite global negatives, Indian sentiments remain positive due to ongoing festive season and healthy earnings announced so far. We expect gradual up-move in the market over the next few days with support base shifting higher,” said Siddhartha Khemka, head of retail research at Motilal Oswal.

Now, let’s take a better look at the weekly performance of some of the listed new-age tech stocks from the Indian startup ecosystem.

The total market capitalisation of the 12 new-age tech stocks stood at $27.62 Bn this week versus 11 stocks ending last week at $31.2 Bn.

Delhivery Falls As Much As 31% 

Delhivery was the biggest loser among the new-age Indian tech stocks this week after the company provided a muted Q2 performance update.

Falling for two straight sessions, Delhivery hit its record low at INR 377.05 on Friday. The shares ended the week at INR 386.55, down about 18% from Thursday’s close. Overall, the shares were down 31% this week.

In The News For

• Delhivery said that the volumes in its supply chain services (SCS) and truckload (TL) businesses declined in Q2, affected by the seasonality in its customers’ businesses.  The startup also said that its market sentiment remained broadly unchanged in Q2 from Q1 while its part truckload (PTL) business was “on a path to recovery” after the Q1 slump. 
• Mandatory IPO lock-in period to expire next month, and risk of further sell-off looms

Competition Watch:

• Shadowfax Technology and Shiprocket have partnered to enable same-day and next-day deliveries for the D2C brands

Delhivery’s commentary about its PTL was much in line with brokerage Jefferies estimates earlier this week.

Jefferies said in a research note that the volume decline in PTL in Q1 led to a 13% stock price correction but this issue would gradually reverse over the next 2-3 quarters, with the first signs in Q2.

With a more bullish view of the stock, Jefferies has a ‘buy’ rating on Delhivery and a price target (PT) of INR 775, which implies over a 100% upside to the stock’s last close.

While Delhivery’s mandatory IPO lock-in also expires next month, Jefferies said it “could see some potential supply in the market”.

Meanwhile, ICICI Securities has maintained a more conservative approach towards Delhivery stocks. The brokerage has a ‘sell’ rating on Delhivery and a PT of INR 477. However, the brokerage also said that the stock “appears to be much better placed than Indian internet players, while appearing expensive as compared to global delivery/Chinese delivery players”.

Nazara Continues To Gain From Esports Boom

Gaming company Nazara Technologies saw its operating revenue more than double to INR 263.8 Cr in Q2 FY23 with esports contributing a major 52% to it while its profit stood at INR 17.4 Cr.

Despite the Q2 update, its shares fell 2%, ending Friday’s session at INR 669. Overall, the shares were down 2.2% on a weekly basis. 

In The News For:

• Nazara Technologies announced CEO Manish Agarwal’s resignation along with its Q2 result update. Agarwal would step down from his position on December 1 this year and Nazara’s founder and joint managing director Nitish Mittersain would takeover
• The gaming giant revised its FY23 outlook upwards. It now expects to see a consolidated revenue growth in the range of 70%-75% on a YoY basis in the current fiscal year.

Nazara continues to see growth across its portfolio despite scepticism persisting across some brokerages and the regulatory uncertainties in the Indian gaming industry, particularly in esports and real-money gaming.

Last month, the Tamil Nadu government approved an ordinance for banning online gaming in the state, which had temporarily hit the Nazara stocks. However, the stocks regained momentum once again.

Besides, brokerage JM Financial has recently shown concern over the company’s acquisition spree and its possible impact on the long-term growth narrative.

In line with the trend of other new-age tech stocks, Nazara is currently down over 66% from its debut price of INR 1,971 on the BSE.

Nykaa Shares Close To IPO Issue Price

Shares of FSN E-Commerce, the parent entity of Nykaa, hit its all-time low at INR 1,128 this week. On Friday, the shares ended the trading session down 2.3% at INR 1,135.85 and are extremely close to its IPO issue price of INR 1,125.

In The News For:

• Nykaa’s mandatory lock-in period will be ending next month, which makes some analysts fear further sell-offs
• Brokerage Nomura initiated coverage on Nykaa stock with a ‘buy’ rating and said that the stock has the potential to double in the next five years. It also set a PT of INR 1,365 on the stock, implying a 20.4% upside to its last close on BSE. 

The past few weeks have been a major reality check for Nykaa, given its performance in the stock market has been hit significantly, reversing its stellar debut in the stock market last year. Some analysts are of the opinion that the stock shows fewer signs of immediate revival. 

“While Nykaa is certainly a differentiated play, the fact that 12%+ shareholding is sitting on 100x returns might even be a reason enough for these investors to diversify their portfolio that might be overweight Nykaa,” said JM Financial in a recent research note.

However, the brokerage also noted that Nykaa’s lock-in expiry comes around the same time as the startup will report its Q2 results, and strong results might also attract buyers.

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