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Tech stocks continue to slump as FY22 losses surpass last year’s

One97 Communications, the parent firm of Paytm, reported a loss somewhat similar to that of last year’s. It posted a net loss of Rs 1,631.50 crore during the nine months of FY22 against previous year’s net loss of Rs 1,696.10 crore.

 

By Yoosef KP

The pack of new-age tech companies continued to fall, even after the rebound in the broad market after Thursday’s bloodbath. The inclusion of Paytm and Nykaa in the Nifty Next 50 Index did not do much to change the sentiment as they continued to fare badly on Friday when the Nifty50 gained 2.5%.

To make matters worse, losses for nine-months to FY22 have even surpassed their full-year losses in the previous fiscal. While the 9MFY22 net loss of Zomato exceeded its FY21 loss of Rs 812.82 crore, the net loss of Star Health Insurance has even widened to Rs 958.63 crore, against its FY21 loss of Rs 825.58 crore. Zomato’s net loss for the nine months of the current financial year stood at Rs 849 crore, Capitaline data show.

One97 Communications, the parent firm of Paytm, reported a loss somewhat similar to that of last year’s. It posted a net loss of Rs 1,631.50 crore during the nine months of FY22 against previous year’s net loss of Rs 1,696.10 crore.

Market experts are of the view that the worst is not over yet for these companies, as profitability remains elusive for a long time. Even after sharp corrections, the valuation multiples of several of them are higher than their larger US peers. “I feel that the worst is not over for these new-age tech companies,” said Raamdeo Agrawal, chairman, Motilal Oswal Financial Services. The companies are fully digital but the business model is weak and making losses, Agrawal added.

The valuation premium that many of them commanded at the time of listing was very huge despite the fact that they were making losses. While Paytm and Zomato had market capitalisation of over Rs 1 lakh core at the time of listing, the market valuation of Star Health Insurance stood at Rs 52,191.23 crore on the debut day.

Sebi last week floated a consultation paper, proposing loss-making, new-age tech firms to make additional disclosures on pricing in their offer documents. “No one knows how long these companies will take to turn around, but surely won’t be any sooner,” said Amit Khurana, head of equities at Dolat Capital.

The three tech stocks that will be a part of Nifty Next 50 Index effective March 31, 2022 are Zomato, FSN E-Commerce and Paytm. While the stock of Nykaa declined 0.75% in Friday’s trade, Zomato and Paytm gained 0.50% and 1.5%, respectively. The BSE IPO index, which tracks newly-listed companies for two years, has declined 20.8%, compared with a 4.1% drop in the Sensex during the same period.

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