Zomato, Paytm stocks shoot up, making investors rich

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Stocks of new-age companies like Paytm, Zomato are making a thumping comeback, riding on the current market high. As per reports, shares of six companies, namely Zomato, Paytm, Nykaa, PaisaBazaar, Delhivery and Car Trade Tech have cumulatively earned back Rs 45,000 crore. This comes after they bled Rs 1.59 lakh crore on Indian bourses in 2022. 

Improved financials, strong cost-cutting measures and concerted efforts to achieve profitability have yielded positive results, which is showing on their balance sheets. Last year, Zomato laid off 3% of its staff, under a cost cutting exercise. In fact, many analysts who track Paytm are optimistic that the stock will breach the Rs 1,000-mark within the next year. 

Gaming company Nazara reported an 18.18% uptick in its quarterly profit of Rs 2.60 crores in March, 2023. PaisaBazaar’s lending arm is going from strength to strength, with its annualized loan disbursal rate jumping 76% to Rs 15,000 crores in March, 2023. 

Explains Akshar Shah, founder, Fixed Invest,  “New-age tech startups faced trouble over the last 1 year. This is because over the last 1 year interest rates rose globally which led to scarcity of easy money. As tech startups’ business model largely required dependency on external funding for growth, that slow down led to a massive fall in valuations. These stocks  were beaten down well over 30-40%”. 

However, things are better now. “Over the last 3-4 quarters too, these startups have now controlled their costs amidst layoffs and lower marketing spends and that has helped their unit economics as well. Also, with signs of global central banks pausing and slowing the rate hikes, it comes as a respite for new age tech start ups and liquidity in the market eases”, he adds. 

Should you jump on the bandwagon? 

You can dip your feet, but be sure to not get into these choppy waters without adequate protection. As Shah continues, “New age tech companies continue to be volatile and hence high risk high return opportunities today. Ideally, these companies should be relegated to the high risk high return allocation of portfolio

Pune-based Nema Chhaya Buch, founder, Wishing Tree Fin(OPC) Pvt. Ltd also advises retail investors to stay patient and not succumb to the stock’s short-term price hike. “For small-time retail investors, it is important to understand that a stock’s price rise is a  response to corresponding buy calls by the analysts. But, the retail investor does not have the means to independently verify these assumption changes and the support for buy decisions? Therefore, you should wait and watch for these stocks to perform in reality. If that is not the case, you might end up being caught up in near term price hype”.