Last week, Jefferies’ Global Head of Equity Strategy Christopher Wood caught attention when he announced picking Zomato to his global long-only equity portfolio by reducing weightage in JD.com and Alibaba. Back home, Dipan Mehta of Elixir Equities has gone to the extent of saying that the new-age stocks, which were one of the worst wealth eroders of 2022, could actually turn out to be multibaggers in the next decade.
“We are approaching new-age companies just as you buy options and with a very long term view like 5-10 years or so. The likes of Zomato, Policy Bazaar, Nykaa, Paytm are stocks of the decade of the 2030s. They could be huge multibaggers over the next seven- eight years or so. But they have this investment phase which they are in, which is reflected in their P&L,” Mehta said.
The calendar year 2022 saw India’s top 5 new-age companies – Paytm, Zomato, PB Fintech (Policy Bazaar), Nykaa and Delhivery – losing up to around 60% as investors lost a cumulative of Rs 2 lakh crore.
The adjusted EBITDA profitability figures of some of the new-age companies are now changing the mood. In the last 3 months, Zomato is up 25% while Paytm has rallied around 18%. Shares of Delhivery and PB Fintech are also up by 7-8% each.
Zomato has guided for adjusted EBITDA and PAT breakeven (including Blinkit) within the next four quarters while Paytm’s Vijay Shekhar Sharma is now eyeing free cash flow in near future.
Delhivery, on the other hand, reported positive EBITDA margin in Q4 for the first time since listing. PB Fintech reported break-even at the operating level.In FY23, multi-channel auto platform CarTrade Tech reported PAT of Rs 40.4 crore while FSN E-Commerce Venture’s profit reduced to Rs 24.82 crore from Rs 41.29 crore in FY22.
Financial results of the remaining four loss-making new-age companies shows that their sales went up from a total of Rs 17,474 crore in FY22 to Rs 24,853 crore in FY23 and loss narrowed down to Rs 4,244 crore from Rs 5,414 crore in FY22.
“This indicates that these companies are moving in the right direction and making progress towards profitability. However, it’s important to note that these companies are still not profitable, and their future profitability is not guaranteed,” said Sonam Srivastava, Founder at Wright Research.
Among the four loss-making companies, PB Fintech appears to be the closest to profitability.
“It’s worth mentioning that achieving profitability may take a few more years for these firms. They face challenges such as economic slowdown, increasing competition, and potentially challenging regulations that could hinder their path to profitability,” Srivastava said while admitting that there is potential for these companies to become multibaggers and compounders in the long run.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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