Mixed Week For New-Age Tech Stocks Amid Dip In Broader Market, Zaggle Emerges Biggest Gainer

The Indian new-age tech stocks witnessed another mixed week, seeing stock-specific action, amid weakness in the broader market. 

Of the 19 new-age tech stocks under Inc42’s coverage, eight gained this week in a range of 0.6% to more than 18%. Zaggle emerged as the biggest winner post its robust Q3 FY24 show.

Earlier this week, Zaggle reported a more than 10X year-on-year (YoY) jump in profit after tax (PAT) to INR 15.2 Cr in the December quarter and 35.1% increase in operating revenue to INR 199.5 Cr.

On the other hand, ideaForge gained almost 4.2%, Zomato jumped about 4%, and EaseMyTrip grew 3% during the week.

Meanwhile, 11 new-age tech stocks declined this week in a range of 0.5% to almost 14%, with Paytm once again becoming the biggest loser amid the regulatory crisis at Paytm Payments Bank.

Nykaa was the second-biggest loser this week, with its shares falling 7.9% as the company’s Q3 FY24 results missed certain Street estimates. While the fashion and beauty ecommerce major’s net profit more than doubled to INR 17.4 Cr in the quarter, its beauty and personal care business continued to witness muted growth.

PB Fintech, RateGain, Mamaearth, Yatra, and CarTrade were also among the losers this week.

In fact, CarTrade slipped into a loss in Q3 FY24, hurt by the loss in the auto sales division of the OLX business that it shut during the quarter.

In the broader market, Sensex declined 0.68% to 71,595.49 and Nifty50 fell 0.3% to 21,782.5

Dr Joseph Thomas, head of research at Emkay Wealth Management, said, “The equity market remained volatile during the week, responding to events like the Fed Policy announcement and the RBI policy in quick succession. (The fact) that it may be a while before the central banks would go in for a rate cut has not pleased many, though the expectation is that the central banks would ultimately relent and that peak rates are behind us.” 

Though the market is good fundamentally, there might be some amount of profit booking resulting in further decline in the coming weeks, Thomas said.

Siddhartha Khemka, head of retail research at Motilal Oswal, said there was a sharp selling in the market on Friday on account of the rise in crude oil prices and muted global cues amid the Lunar New Year holiday in Asian markets. 

“…diminishing hopes of early rate cuts too dampened the sentiments. Post the hawkish commentary from the US Fed and the RBI and their focus on bringing inflation under control, next week’s inflation data would be important data to watch out for,” said Khemka. 

He expects the market to turn cautious and consolidate in the near term, as some key macro data are set to be announced and the Q3 earnings season is nearing its end. 

Now, let’s take a deeper look at the performance of some of the new-age tech stocks this week.

The total market capitalisation of the 19 new-age tech stocks under Inc42’s coverage stood at $42.74 Bn at the end of this week against $43.34 Bn in the previous week.

Paytm’s Struggle Continues

Shares of fintech major Paytm continued to witness volatility amid the ongoing regulatory issues at Paytm Payments Bank. In the first trading session of the week, Paytm shares slumped to hit a lower circuit but gained in the next two trading sessions. 

However, the shares slumped once again in the last two trading sessions, ending the week at INR 419.85 on the BSE.

Let’s take a look at the updates in the company this week:

• Paytm CEO Vijay Shekhar Sharma met the RBI officials and finance minister Nirmala Sitharaman this week to discuss the regulatory concerns flagged by the RBI on Paytm Payments Bank.
• Reports emerged this week that Jio Financial Services is one of the top contenders to buy Paytm’s wallet business. However, the fintech major rejected this. 
• Paytm also denied reports of the company or Paytm Payments Bank being under investigation for violation of foreign exchange rules.
• Securities depository Central Depository Services India (CDSL) initiated customer verification inspection of Paytm Money
• RBI’s deputy governor Swaminathan Janakiraman clarified that the central bank’s action is against Paytm Payments Bank and not the Paytm app.
• Paytm formed a group advisory committee, headed by former SEBI chairman M Damodaran, to address compliance and regulatory issues.
• Reportedly, Paytm is close to getting approval from the authorities for additional investment in its payments arm Paytm Payments Services Ltd.

As the problems continue, the shares of Paytm remained under severe pressure this week. Further movement in the stock is likely to be guided by the developments on the regulatory front.

Amol Athawale, VP of technical research at Kotak Securities, said it is difficult to predict the movement of the stock as it is highly volatile and reacting to news stories. 

“However, INR 525-INR 550 would be the immediate resistance. Further corrections cannot be ruled out in the near future,” Athawale added.

Zomato Posts Third Profitable Quarter

Shares of food tech major Zomato surged 6.3% in the last two consecutive trading sessions of the week after it posted a profitable Q3 FY24. Its net profit jumped 283% sequentially to INR 138 Cr in the reported quarter.

While the company’s core food delivery business growth remained muted, Zomato’s quick commerce business Blinkit as well as B2B business, Hyperpure, showed strong momentum in Q3.

Shares of Zomato gained 3.9% overall during the week, ending at INR 149.45 on the BSE.

Several brokerages have reiterated their confidence in Zomato post the earnings. Jefferies raised its price target (PT) on the stock to INR 205 from INR 190 earlier, which implies an upside of over 37% to its last close.

“3Q FY24 was another strong quarter with exceptional performance in quick commerce and smart margin gains in food delivery; growth here could have been better, but (the) result is understandable in the context of weakness across consumption categories,” said the brokerage.

Emkay also raised its PT to INR 170 from INR 140 earlier. The analysts at the brokerage said they liked Zomato’s strong growth and execution in Blinkit but did not like muted consumer demand leading to lower-than-expected food delivery GOV growth.

Zomato’s food delivery GOV grew a mere 6.3% QoQ to INR 8,486 Cr in Q3.

Kotak’s Athawale said Zomato is consistently forming higher-high higher-low on the charts and the larger texture is still bullish. 

“However, in the short-term, it seems to be slightly in the overbought zone. Considering overall market conditions, it might see range-bound activity in the near term,” he said.

Athawale sees INR 139-INR 140 as immediate support for the stock. The stock can move up to INR 160-INR 165 in the near future.

Mamaearth’s Q3 Earnings

Listed D2C major Mamaearth posted a 264% jump in its consolidated net profit on a YoY basis to INR 25.9 Cr. However, it was a decline sequentially from INR 29.4 Cr posted in Q2 FY24. 

Operating revenue also took a hit on a QoQ basis but grew 28% YoY to INR 488.2 Cr during Q3 FY24.

Despite the muted growth on a QoQ basis, Varun Alagh, chairman and CEO of Honasa Consumer Limited, Mamaearth’s parent entity, said that the Q3 results are a testimony of the company’s deep understanding of the beauty market in India. 

“Four out of six brands from our portfolio are already in the INR 150 Cr ARR club and we see this as a testimony of our capabilities,” he said. “As we move forward, focus continues to be on purpose-based brand building, innovation and distribution expansion.” 

Shares of Mamaearth fell 0.8% this week. However, on Friday, ahead of the company’s earnings announcement, its shares ended 3.5% higher compared to Thursday’s close at INR 432.75 on the BSE.

Athawale said that INR 419-INR 420 is the immediate support zone for the stock. If it sustains this level, it can bounce to INR 460-INR 470. 

He sees INR 480-INR 485 to be the immediate resistance level.

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