Indian new-age tech stocks witnessed a bull run this week, largely helped by stock-specific developments and the overall improvement in the broader domestic market as IT companies reported better-than-expected Q3 FY24 results.
Fourteen out of the 19 new-age tech stocks under Inc42’s coverage rose this week, gaining in a range of 0.8% to 20%. EaseMyTrip emerged as the biggest winner, with its shares surging 19.8% on the BSE.
EaseMyTrip’s competitor Yatra gained 18.3%, while Nazara Technologies rose 11.2%. PB Fintech, Paytm, Zomato, Nykaa, and Mamaearth were among the other gainers this week.
From EaseMyTrip’s suspension of flight bookings to Maldives to Paytm’s INR 100 Cr investment announcement in Gujarat International Finance Tec (GIFT) City, the listed tech startup ecosystem had an eventful week.
Only five new-age tech stocks declined during the week, slipping between 0.4% and 6%. DroneAcharya, IndiaMART, and ideaForge fell over 5% on the BSE this week.
After a decline last week and the beginning of this week, benchmark indices Sensex and Nifty gained 0.75% and 0.85%, respectively, this week. Sensex closed 1.18% higher at 72,568.45 on Friday and Nifty ended the week 1.14% higher at 21,894.55, with both the indices touching fresh all-time highs.
A rally in IT stocks and a 19% surge in India’s net direct tax collections supported domestic equities to make new highs on Friday, said Siddhartha Khemka, head of retail research at Motilal Oswal.
“Nifty is now just 100 points away from crossing another milestone of 22K zone. In the coming week, the market will take cues from Q3 results, India’s inflation, and US PPI data. Thus, we might see stock-specific action,” said Khemka.
Overall, with a positive start to the December-quarter earnings season, experts see further rally in the market from here on.
Prashanth Tapse, senior VP (research) at Mehta Equities, said, “Investors are hoping that likely rate cuts by the Fed later this year would improve the scenario for the IT sector, which will enable big clients to increase spending on IT sourcing.”
Now, let’s take a look at the performance 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 $42.34 Bn at the end of this week as against $39.72 last week.
EaseMyTrip Emerges As The Biggest Winner
EaseMyTrip emerged as the biggest winner this week as its shares rallied almost 20% this week. The stock rose to an 11-month high.
There were two main developments around the stock this week:
The traveltech major announced the launch of its new subsidiary, EaseMyTrip Insurance Broker Private Limited, this week to foray into the insurance broking space.
Amid the ongoing tensions between India and Maldives following Prime Minister Narendra Modi’s visit to Lakshadweep, the startup announced suspension of all flight bookings for the island nation. EaseMyTrip has also started flaunting a tagline, “Nation First, Business Later.”
The developments come at a time when the startup is looking to raise INR 1,000 Cr through a preferential issue.
After being one of the few gainers in 2022, when most of the listed new-age tech stock slumped, 2023 turned out to be a muted year for EaseMyTrip. Its shares fell over 23% last year. However, the stock has been witnessing an uptrend since the beginning of 2024 and has already gained 23% year-to-date (YTD).
Nykaa Regains Investors’ Confidence
In its Q3 FY24 performance update, Nykaa said that the fashion vertical continued to see strong growth even as the beauty and personal care (BPC) business witnessed a slowdown.
The ecommerce major said that its fashion vertical’s gross merchandise value (GMV) for Q3 is expected to grow at around 40% YoY, while the same for the BPC vertical would be in mid-twenties.
“For Q3 FY24, at a consolidated level, we expect our NSV to grow in the mid-twenties and revenue to grow in the low twenties on a YoY basis,” Nykaa said.
The business update cheered the street as its shares gained 11.7% till Thursday, rising in all four sessions. However, the stock slumped over 3% on Friday to close the week at INR 187.6 on the BSE, as Lexdale International Limited offloaded 2.6 Cr shares in the company in a bulk deal worth INR 495.4 Cr.
Overall, Nykaa shares gained 8.2% this week.
Experts believe that large block and bulk deals pose a risk to the share prices of new-age tech companies like Nykaa, Paytm, Zomato, and Mamaearth in the near to medium term.
Meanwhile, brokerage Jefferies increased its price target (PT) on Nykaa this week to INR 230 from INR 200, which implies an upside of 6.6% to the stock’s last close.
The brokerage believes that Nykaa would continue to see steady growth with improving margins, supported by operating leverage.
“The growth runway in BPC is huge as the category is still in a nascent stage in India,” Jefferies said. “Competition is a concern, and hence a key monitorable.”
On the other hand, Nykaa also found a mention in Goldman Sachs’ research note this week, titled “The rise of ‘Affluent India’”. The brokerage said Nykaa is among the companies that would benefit from the rise in the number of ‘affluent’ customers in the country.
The international brokerage expects Nykaa’s revenue to grow at a 27% CAGR in the FY24-FY27 period.
Blinkit’s Strong Show To Drive Zomato’s Growth
Shares of Zomato touched a new 52-week high this week as they rose 4.8% on the BSE. The stock ended the week at INR 139.6, a level last seen in the beginning of January 2022.
Several brokerages, including HSBC, Goldman Sachs, and Jefferies, increased their PTs on Zomato this week, ahead of its Q3 earnings, by INR 10-INR 30.
While HSBC sees Zomato’s December quarter results to be slightly muted, it believes Blinkit would continue to show steady growth.
It said that a further upside in the stock would be largely driven by the quick commerce business and assigned a PT of INR 150 to Zomato.
On the other hand, Jefferies raised its PT on Zomato to INR 190, which implies a 36.1% upside to the stock’s last close. It expects Blinkit to see a faster scale up at 38% CAGR over FY24-28, with the vertical’s contribution margin rising to 6% by FY28 and EBITDA margin to 4%.
Meanwhile, in its note on the rise of ‘Affluent India’, Goldman Sachs picked Zomato as one of its top ideas and said that the competition from Swiggy will remain “benign”.
Meanwhile, Zomato’s series of experiments continues. This week, it introduced a daily payout feature for select restaurants.
Mehta Equities’ Tapse also included Zomato in the list of bullish stocks. “Zomato is highlighted as a top pick with targets at INR141/INR 163 and aggressive targets at INR 201 over a 12-15 month holding period,” he said.
The post New-Age Tech Stocks Rally As Q3 Earnings Season Starts On A Positive Note; EaseMyTrip Biggest Winner appeared first on Inc42 Media.
