Zomato, Paytm, Nykaa, PB Fintech at record lows: What’s leading to the selloff?

Shares of recently listed tech startups including  Paytm, Zomato, PolicyBazaar, and Nykaa plunged to their record lows on Monday. Shares of recently listed tech companies have fallen between 20% and 50% in the last week. Let us look at some reasons for the fall.

Reasons for fall in share prices

The US-based non-finance index,  NASDAQ 100, is witnessing a heavy correction. The primary reason being the Tech stocks in the index like  Netflix, Amazon, Facebook, Tesla, etc are trading at premium or over-valuation. With the Federal Reserve in the US expected to increase interest rates sooner than expected, investors are withdrawing money from these over-priced stocks, and rotating into companies with more stable cash flows. Software has been among the hardest hit on fears that higher interest rates will continue to eat away at valuations that are based on profits expected to be delivered far into the future. The repercussions of this sell-off in the US are seen in recently listed Indian tech companies. 

How much have they fallen?

Zomato: The share has fallen over 30% in the last five trading sessions. On Monday afternoon, it is trading at Rs 92.75 per share. You can check out our detailed article on the reasons for the fall in Zomato price here.

Paytm: Paytm investors have suffered most with the share price below Rs 900 now. Investors' wealth has been swiped in less than 6 months of its listing on the exchanges. Even before the recent sell-off, Paytm was on the radar of analysts' and most of them have given SELL calls. There are concerns over its business growth potential. It is working in too many segments and where the profits are going to come is not certain. With no profitability, the share is taking a hit.

Foreign brokerage Macquarie has earlier revised the target price from Rs 1200 to Rs 900. Now, the stock is trading below that. What is the right price to buy the share is not certain with no profitability visibility.

PB Fintech: The parent company of PolicyBazaar has lost over 45% of the value from the peak level. On Monday afternoon, the PB Fintech was trading at below Rs 800, down 8%. Morgan Stanley in its recent report has given a target price of Rs 1,160 on the stock. It was before the recent sell-off. Investors should wait for updated targets on PB Fintech.

CarTrade: CarTrade's share price has fallen close to 50% in the last 6 months. On Monday afternoon, the stock was trading 4% lower at Rs 780 per share. The CarTrade was going down even before the recent sell-offs because of the slowdown in the auto industry. The COVID cases will continue to affect its business, its operations and cash flow. Also, the company came with a 100% Offer for Sale, and hence it does not have any funds for business expansion. Citigroup Global Markets have initiated its coverage on the counter with a buy at current prices and have set the 12-month target price at Rs 1,130.

Nykaa: Shares of another listed start-up, Nykaa dropped 9% to Rs 1817.7. The scrip has dived 30% from its 52-week high scale in November 2021. All the five stocks hit their respective 52-week lows during early trade this morning. Market analysts said that the correction in global stocks has impacted the sentiment for these overvalued tech startups. In December this year, HSBC gave a “Buy” rating on the stock with a target price of Rs 2,090.