Paytm: Biggest Loser in Lacklustre Week for New-Age Tech Stocks

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Three points you will get to know in this article:

  1. New-age tech stocks in India experienced varied movements, with 11 out of 19 stocks slumping, led by Paytm’s significant loss due to strategic changes.
  2. Sensex and Nifty50 surged to all-time highs after the RBI raised FY24 GDP growth forecast to 7%, boosting investor confidence.
  3. Despite mixed stock performance, new-age tech’s total market capitalization decreased, influenced by regulatory factors and company-specific developments.

Despite the Indian stock markets reaching record highs this week, modern tech stocks faced a mixed scenario, experiencing mostly constrained movements. Notably, a selling trend emerged across various counters.

Among the 19 new-age tech stocks covered by Inc42, eleven witnessed declines ranging from 0.2% to a substantial 25% this week. Paytm emerged as the most significant loser during this period.

Other notable players such as Nykaa, CarTrade Technologies, PB Fintech, Fino Payments Bank, and Yudiz also experienced a downturn. In the midst of this, Zaggle maintained its position without any significant changes week-on-week, while only seven new-age tech stocks managed to gain ground in the current market conditions.

Tracxn Technologies emerged as the top performer this week, boasting a noteworthy 3.3% increase. Interestingly, amidst this upward trend, Elevation Capital chose to part ways with more than 15.66 Lakh shares of the company through block deals, amounting to a substantial INR 15.09 Cr transaction on Friday.

In a similar stride, DroneAcharya, Zomato, and IndiaMart each experienced gains exceeding 3% over the week, while ideaForge and Nazara Technologies posted respectable increases of over 2% individually.

In a distinct development, Mamaearth, the direct-to-consumer (D2C) unicorn, maintained relative stability following Fireside Ventures’ strategic move to partially divest its stake. The unicorn’s shares reflected a marginal 0.1% gain for the week. In the final trading session of the week, the stock market witnessed a surge, propelled by the Reserve Bank of India (RBI) revising its GDP growth forecast for FY24 to 7%.

To sum it up, Sensex experienced a robust 3.47% climb, closing the week at 69,825.6, while Nifty50 saw a commendable 3.5% rise, concluding at 20,969.4. It’s worth noting that despite the positive economic outlook, the RBI opted to maintain the repo rate at 6.5%, expressing concerns about potential inflationary pressures.

“Amidst a robust economic forecast, stellar Q2 earnings, and adjustments in oil prices, mid and small caps maintained their impressive performance,” remarked an industry expert.

Expressing a similar sentiment, Prashanth Tapse, Senior Vice President of Research at Mehta Equities, highlighted that even with technically overbought conditions, the short-term market outlook leans favorably towards the bulls.

Regulations Hinder Paytm’s Bull Run

This week dealt a heavy blow to the leading fintech player, marking it as the top loser in the market. A staggering drop of more than 25% in its shares came on the heels of its strategic move to streamline its loan disbursement operations.

It’s like the financial landscape took a surprising turn, and this major player found itself in a tough spot. The decision to scale back on loan disbursements sent shockwaves through the market, resulting in a significant dent in its stock value. In a week full of ups and downs, this fintech giant experienced a downturn that caught many by surprise.

In The News For 

After a recent news piece suggested a temporary pause in Paytm’s Postpaid loan services, the fintech powerhouse clarified during an analyst call that while Postpaid loan operations persist, there will be a brief cessation for a specific group of users seeking small-ticket loans below INR 50,000. It’s essential to highlight that loans under INR 50,000 constitute a significant portion of Paytm’s BNPL business at the moment.

In a bid to adapt to this shift, Paytm has announced a strategic shift, emphasizing a stronger emphasis on customers with lower risk profiles and high creditworthiness. This move aims to enhance the disbursement of both merchant and personal loans, showcasing Paytm’s commitment to a more secure and reliable customer base. In the wake of the company’s recent revelation, numerous brokerage firms, once optimistic about Paytm’s expansion, revised their projections for Paytm’s near and mid-term performance.

SoftBank Exits Zomato

Last Friday saw SoftBank’s SVF Growth (Singapore) making moves in the business dance floor by selling off a chunk of Zomato shares in a block deal, pocketing a hefty INR 1,127 Cr. This strategic maneuver led to a 1.1% reduction in SVF’s stake in the company, making waves in the financial seas.

Interestingly, this follows closely on the heels of Alipay, the Chinese payments heavyweight, bidding adieu to Zomato just last week by parting ways with its entire 3.44% stake. It seems the tides of change are sweeping through the food tech landscape.

In the aftermath of SVF’s exit, the baton of ownership for the shares was passed on to prominent players like Invesco, ICICI Prudential Insurance, Goldman Sachs (Singapore), Kadensa Capital, and Morgan Stanley Asia Singapore, among others. The Japanese investor’s shares found eager takers in this high-stakes relay.

As the final curtain fell on the week, Zomato’s shares experienced a 1.6% dip on the BSE, settling at INR 119.9. It’s a reminder that in the fast-paced world of business, every move on the chessboard can cause ripples in the stock market waters. In a recent research report released just a month ago, ICICI Securities boosted its price target for the stock to INR 164, up from the previous INR 160. This adjustment now suggests a potential gain of nearly 37% based on the stock’s last closing price. According to the brokerage, “We’re optimistic that the company is on track to meet its medium-term adjusted EBITDA goal of 4-5% in the food delivery sector and aims to achieve adjusted EBITDA breakeven in Blinkit by the first quarter of the fiscal year 2025.”

Stake Sale Begins In Mamaearth

In a notable transaction, Fireside Ventures, an early supporter of Honasa Consumer, made its first significant bulk sale this week by offloading 60.89 lakh shares, representing a 1.89% stake in the company.While Mamaearth isn’t facing immediate selling pressure from major pre-IPO investors, given their six-month lock-in period, it’s worth noting that Fireside Ventures and Stellaris Venture are exceptions to this rule.

Following this strategic divestment, Mamaearth’s shares remained within a certain trading range, concluding the week with a modest 0.1% uptick to INR 400.05 on the BSE. It’s worth mentioning that the stock had experienced a notable 16% decline just last week. As it stands, Mamaearth’s shares are currently trading 23.47% higher than their initial listing price, indicating a resilient market performance amidst recent fluctuations.

This week, Indian stock markets reached all-time highs, but new-age tech stocks faced mixed fortunes. Eleven out of 19 stocks slumped, led by Paytm’s 25% dip due to scaling back its loan disbursement business. Conversely, Tracxn Technologies gained 3.3%. Sensex and Nifty50 also surged, driven by the RBI’s upgraded FY24 GDP growth forecast. Specific stocks such as Zomato and Mamaearth saw notable activity, with SoftBank and Fireside Ventures selling stakes. Overall, new-age tech stocks experienced varied movements amidst broader market optimism.

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