Due to the ongoing pandemic and the ensuing coronavirus-induced fatigue, online consumption has taken a hit, raising concerns among investors on the future of new age companies in the country. The third quarter saw most of the new-age tech companies report losses, making investors and analysts worry about the fourth quarter performance as well.
Among the new age companies, Paytm, Zomato, Nykaa, and Delhivery have received much attention in recent quarters. According to the ICICI Securities report, the B2C sector might struggle to make it through Q4 as consumption fatigue remains in the online food and beauty industry, but the B2B e-commerce sector is expected to continue to grow strongly.
Paytm, the fintech giant reported improvement with net loss narrowing to Rs 392 crore and profitability at the EBITDA level. Zomato, the food delivery company, slipped deeper into the red with a net loss of Rs 347 crore. Nykaa reported a positive net profit in the third quarter but it saw a year-on-year decline of 71%. In contrast, internet logistics company Delhivery posted a 5.8% Q-o-Q increase in revenue.
Given these numbers, investors are looking for advice on what action they should take going forward. YES Securities raised the target price of Paytm to Rs 700 while maintaining a ‘neutral’ rating, while Kotak Institutional Equities has given a ‘Buy’ rating for Zomato, Just Dial, and Delhivery and ‘Add’ rating for Zomato. Investors should use this information on a case-by-case basis and likely diversify their portfolios to reduce any single point risk.
It is also important to study the founders of the companies. Vijay Shekhar Sharma is the founder of Paytm and the driving force behind the fintech major. Sharma has been instrumental in driving Paytm to the top of the fintech industry with his bold vision and unconventional decisions. Similarly, Deepinder Goyal, the founder of Zomato, has successfully transformed the company from a restaurant search company to a complete meal delivery provider. Ritesh Agarwal is the founder of Oyo, launched in 2013, and has made it into one of the most successful hospitality companies in the world in just a few years. Neena Chauhan Korlakunta is the Founder and CEO of Nykaa, a leading Indian beauty and wellness destination. With these strong founders and the relative uncertainty of Q4 performance, investors should opt for a diversified strategy that balances risk and rewards.