New-age companies had ruled the roost when it came to initial public offerings (IPOs) last year, but now as investors want to divest from riskier assets in the game of huge valuations and future promises versus current prospects and macroeconomic situations, these stocks are bleeding profusely.
One97 Communications (Paytm’s parent company), Zomato, FSN E-Commerce (Nykaa's owner), and PB Holdings’ Policybazaar and Cartrade Tech have lost Rs 2.28 lakh crore in market cap, which is a loss of over 56 percent when compared to their cumulative 52-week highs.
While global macroeconomic conditions -- read hawkish stance of central banks to combat rising inflationary pressure, Russia’s invasion of Ukraine, and continuing pockets of COVID-19 pandemic -- have caused markets to stumble, new-age companies have suffered far worse than others. The Sensex as a whole has suffered a loss of just over 10 percent from its 52-week high.
One97’s share price slid afresh on March 15 after the Reserve Bank of India (RBI) barred Paytm from onboarding new accounts for its Paytm Payments Bank, causing shares to slip to Rs 589. This is in steep discount to its IPO price of Rs 2,150. While Nykaa shares have recovered some in the past five days, it is still trading at almost a 40 percent discount to its listing price.
Analysts have also advised investors to reduce their exposure to these companies with concerns regarding stretched valuations that are based on future expectations.
"Reduce exposure to new-age stocks like Paytm, Zomato. The valuations they ask are huge and based on future business scope and not on present business. One may keep a small portion allocated in these stocks and go for other established businesses in small- and mid-cap sectors with a strong business framework," Manoj Dalmia, Director, Proficient Equities, told The Economic Times.
