As one-year anchor lock-in period for parent firms of Nykaa, Policybazaar and Patym nears its end, analysts have advised caution for investors of these new-age tech companies.
Shares for FSN E-Commerce Ventures Ltd., PB Fintech Ltd. and One97 Communications Ltd. have fallen 17.19%, 22.14%, and 11.07%, respectively, since Sept. 1.
Nykaa’s parent recovered the losses since last week. Also, the online retailer may escape a “big” selloff as its bonus issue will limit the number of shares that can be sold before Nov. 15, according to a Jefferies report.
Still, since listing on the bourses last November, shares of FSN E-Commerce (Nykaa), PB Fintech (Policybazaar) and Paytm (One97) have tumbled 48.68%, 67.91%, 58.27%, respectively. The selloff was partly driven by global technology stock rout.
For FSN E-Commerce, the anchor lock-in ends on Nov. 10. For PB Fintech and One97, the regulatory leash ends of on Nov. 15 and Nov. 18, respectively.
Here’s what analyst BQ Prime spoke with have to say about Nykaa, Paytm and Policybazaar:
Amit Jeswani, founder of Stallion Asset Pvt. Ltd., said investors should buy Paytm and PB Fintech after the unlock happens.
“There is going to be some guaranteed panic supply as there is going to be a large position offloaded,” he said. “You don’t buy before the panic, you buy after the panic.”
Investors need to calculate the worst-case valuation for these stocks, Jeswani said. Alongside, they need to consider the future cash flow of these companies and understand from where the future large profits are going to come.
While this is a short-term negative, the street is already pricing the multiple lock-in expiries set for November. “The markets will not give (anchor investors) an easy exit. Markets will make sure that the prices go back to the worst-case possible price.”
Jeswani iterated that till there is no path to profitability, the markets will not pick them up beyond a point.
However, Nykaa has become a very tough proposition, Jeswani said. “Two days before the split date for bonus issue, which is Nov. 11, the stock will get adjusted. No one will be able to sell, even if they want to sell they will be able to sell 1/5th the quantity.”
Supply is short-term negative for these three stocks but over the long term, people will value these stocks based on long term cash flow, ability and capability of management to generate very long term cash flow, he said.
It is not advisable to buy these stocks as the valuations are not getting justified properly, according to Deven Choksey, managing director of KR Choksey,
“When these stocks got listed, at that point of time the hype was more on the business model but now after the listing, the reality check is whether they are profitable and till the time the businesses are profitable, their valuations could not be justified.”
Even though these are “good” business models, they need to be profitable to sustain the current valuations or what they were earlier, he added.