Zomato, Paytm, Nykaa, other new-age internet stocks see FPIs raise stake in past year

The new-age tech stocks Zomato, Paytm, PB Fintech, Nykaa, Delhivery and others have seen rising interest from foreign investors over the past one year as these companies seem to have been improving their business models and reporting decent growth with operational efficiencies.

The Foreign Portfolio Investors (FPI) have raised their shareholding in these new-age tech companies, as seen in the June quarter shareholding pattern. The inflow of smart money comes as many of these loss-making, and often termed ‘overvalued’, companies are witnessing sharp revenue growth and narrowing of losses.

FPIs have increased their stake in One97 Communications, the parent company of Paytm, to 16.86% at the end of June 2023 from 5.45% in June 2022. FPI shareholding in food delivery aggregator Zomato rose to 33.33% in June 2023 from 9.85% in June 2022.

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Similarly, FPIs hiked their shareholding in PB Fintech to 29.67% as of June 2023 from 14.08% last year and in Delhivery, they raised stake to 22.7% from 8% during the said period.

FSN E-Commerce Ventures, the operator of online fashion and beauty products platform Nykaa, saw an increase in FPI shareholding to 10% at the end of June 2023 from 6.5% in June 2022, as per the latest shareholding data available on exchanges.

Turn around in the business prospect of these new age tech companies has helped restore the confidence of Foreign investors. These companies are likely to turn profitable amid improving operating efficiencies, cost cutting efforts and building new revenue streams.

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In the Q1FY24 results, Zomato showed profitability for the first time ever. The food aggregator turned profitable during the quarter ended June 2023 and reported a consolidated net profit of ₹2 crore as against a loss of ₹186 crore in the year-ago quarter. The company’s EBITDA loss also narrowed down significantly during the quarter.  

Brokerage firm Motilal Oswal Financial Services now estimates Zomato to turn positive on reported EBITDA by Q4FY24, and deliver around 5% EBITDA margin in FY25, which should further drive profitability.  

“The food delivery business is still in a nascent stage in India with a long runway for growth. With a dominant market share and strong growth in the food delivery business and Hyperpure, we expect Zomato to report a strong 43% adj. revenue CAGR over FY23-25,” Motilal Oswal said.

Similarly, fintech giant Paytm’s net loss in Q1FY24 narrowed to ₹357 crore from ₹644 crore, YoY, while PB Fintech cut down its consolidated loss by 94% to ₹11.9 crore from ₹204 crore, YoY.

The improved performance was also reflected in the share prices of these companies. Zomato share price have rallied over 44% in the last one year, Paytm shares jumped over 66%, while PB Fintech shares gained more than 44% in the last one year. 

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