SUMMARY
Andrew Holland said that if the startups continue to grow, it would be a big opportunity to buy their shares
New-age tech stocks have been in the news over concerns about their profitability and the expiry of the lock-in period for many of them
While Zomato’s lock-in period expired earlier this year, that of Nykaa ended on November 10. For Paytm, lock-in period ends on November 18
At a time when the new-age tech stocks are in the news for varied reasons — from share market performance to profitability concerns — Andrew Holland, CEO of Avendus Capital Public Market Alternate Strategies LLP, has said that the firm will be closely looking at Nykaa, Paytm, and Zomato in terms of their business models.
In an interaction with ET Now, Holland backed the listed Indian startups and said, “If they can sustain what they have been doing and continue to grow into what should be a huge industry for all of them, then this is the time to kind of dip in.”
Holland is one of the established leaders in the financial services industry. Avendus Capital, India, offers varied financial services such as M&A and private equity syndication services to its clients.
The Avendus Capital CEO’s comments come amid ongoing speculations about these startups’ profitability path, investor confidence, and more.
The three companies, Nykaa, Paytm and Zomato, that Avendus’ Holland mentioned recently announced their financial results for the quarter ending September 2022, and the market sentiment continues to remain mixed to positive on these startups.
It is pertinent to note that 2021 was a year of startup IPOs and 2022 quickly turned into a nightmare for retail investors who invested their hard-earned money. Reports estimate that the 15+ listed Indian startups have together wiped out more than 60% of investors’ wealth over the year.
As several startup IPOs celebrate their listing anniversaries, a mass sell-off is expected for many of them as the lock-in period for their investors expires.
After the expiry of Zomato’s lock-in period, the startup witnessed significant sell-off and its stock price reached its all-time low. Major investors like Moore Strategic Ventures, Uber, Tiger Global, and Sequoia exited the company.
While a similar trajectory was expected for Nykaa, particularly because its pre-IPO investors were sitting on 100X returns, the beauty ecommerce giant’s 5:1 bonus share issue cushioned it from a massive sell-off.
After Nykaa’s lock-in expiry last week, its pre-IPO investors including Mala Gopal Gaonkar, Lighthouse India, and TPG Growth sold large volumes of shares, while Narotam S Sekhsaria exited the company by selling his entire stake of 14.7 Mn shares.
However, Aberdeen Standard Asia Focus, Norges Bank, Segantii India Mauritius, Societe Generale, and Morgan Stanley purchased more shares in the company in bulk deals. This led to Nykaa’s shares spiking 15.7% in just two days last week.
While it is yet to be seen how Paytm’s lock-in expiry on November 18 affects the stock, a large number of analysts have forecast that the fintech giant is at the risk of a huge sell-off.
In a recent research note, Goldman Sachs said that lock-in expiry will be an overhang on Paytm. However, the brokerage expects it to deliver 40%-50% revenue growth for the next few quarters and “continue its transition from an erstwhile payments-only business to one with a strong financial services portfolio, aiding profitability”.
Meanwhile, JM Financial also said that Paytm’s upcoming lock-in expiry will be a key near-term overhang for the startup.
Paytm shares ended Monday’s session at INR 638.60 on the BSE, up 1% from its previous close, while Nykaa shares were 1.7% higher at INR 211.55.
On the other hand, after a significant rally last week, Zomato shares fell over 4% on Monday, closing at INR 69.6.
