Recently listed stocks of new-age technology companies including Zomato, Paytm and Nykaa have been facing the brunt of a heavy sell-off owing to higher valuations impacting investor sentiments. Nasdaq slumped 11 per cent year-to-date with some of the stocks such as Netflix plunging 34 per cent YTD.
Investors were attracted to these stocks through IPO and post listing, despite hefty valuations, expecting them to be a ‘future multi-baggers,’ said analysts. In fact, most of the companies are loss making, they added.
Global sell-off in tech stocks have had repercussions in the domestic market with new-age tech stocks witnessing selling pressure over the past five sessions. These stocks crashed further in an already weak market on Monday as Sensex fell over 1,500 points, while Nifty slipped below 17,200.
Zomato was one of the most impacted stocks crashing nearly 20 per cent at closing with the company’s m-cap falling below ₹72,000 crore, as per BSE data. It recorded a new life-time low of ₹91 during the day. The stock is down over 45 per cent from its lifetime high of ₹169.10.
Nykaa (FSN E-commerce ventures) crashed nearly 13 per cent at closing. The company’s stock recorded a new lifetime low of ₹1,693.25 while its m-cap at closing stood at ₹82,045.78 crore. One97 Communications (Paytm) slipped 4.43 per cent, recording a new lifetime low of ₹881.50, down from its listing price of ₹2,150.
PB Fintech Limited, which operates online insurance platform Policybazaar and credit comparison platform Paisabazaar, crashed 10 per cent at closing, recording a new life-time low of ₹766 during the day. CE Info Systems, which owns MapmyIndia, slumped nearly 10 per cent.
CarTrade Tech was down nearly 5.5 per cent. Nazara Technologies and EasyTrip Planners plunged 5 per cent.
Other recently listed companies in the digital and technology space such as RateGain Travel Technologies, CMS Infosystems and LatentView Analytics also slumped, losing around 7-10 per cent.
Valuation, a concern
According to experts, high valuations for such stocks is the major reason for these stocks to underperform. These are all high beta stocks and as the market turn bearish, they fell even more, they added
Arun Kejriwal, founder at Kejriwal Research, an advisory firm, said: “Many of these new age tech companies in India, are loss making. When they became public, people didn’t understand how do you value a loss making company: So they got disproportionate valuation, considering the fact that their IPOs were priced at such a value” .
According to him, “People are now wondering what should be fair value of the stock? I don’t know whether it’s the right time to say that these stocks are getting re-rated, but there is a fresh look at all these stocks all over again,” Kejriwal said.
Kejriwal further said the impact of the sell-off on Wall Street is also impacting these stocks.
Vinod Nair, Head of Research at Geojit Financial Services, said, “Overvaluation is going to be a challenge in the future. This is what led to a sell-off on Nasdaq. “So, this is what is having a replication to all across the world.”
“Sections that are overvalued, are being sold today. And value buying is also seen on beaten-down quality stocks. This pattern is going to continue happen this year,” Nair further said.