India’s goal of creating a market for internet firms that target consumers is once again on track as Paytm, the market leader in digital payments, is leading a $6 billion rally among its competitors so far this year.
One 97 Communications Ltd., the company that owns Paytm, saw a 69% increase in share price and a $2.7 billion increase in market value following an earlier-than-expected increase in profitability. Zomato Ltd., a food delivery platform, and PB Fintech Ltd., which runs Policybazaar, have seen increases of 28% and 47%, respectively, adding more than $1 billion to each company’s market worth.
Efforts by the government and prominent investors like Jack Ma and Masayoshi Son to support the country’s tech unicorns in 2021 were followed by a significant selloff in the sector globally the previous year due to worries about rising rates and a global recession. Changes had to be made because of the stock market crash and several underwhelming market launches.
According to Mumbai-based OmniScience Capital’s chief investment strategist, Vikas Gupta, “the companies realised they had no choice but to make profits or at least have a roadmap.” In addition to concentrating on becoming profitable, they have cut expenditures and abandoned ventures that showed no promise.
With the Nasdaq 100 up 38% this year, it has reversed its fall from 2022. The recovery in India’s new economy stocks comes after a surge in global tech shares. Despite the continued presence of macro concerns, the industry has regained its status as a safe haven during pandemics, in part due to optimism regarding the potential of future technologies like artificial intelligence.
Even as shares in the country’s traditional IT service companies, such as Tata Consultancy Services Ltd. and Infosys Ltd., have fallen, Paytm and its cohort have risen. Concerns concerning the financial stability of formerly high-flying startup Byju’s have been dispelled by the rebound in new-age tech companies.
Even with this year’s increases, the price of Paytm shares is still about 60% below what they were when they went public in November 2021. However, with 85% of analysts recommending that investors buy the company’s stock, they are still optimistic about its capacity to turn a profit.
Nykaa’s owner, FSN E-Commerce Ventures Ltd., is also still in the red, but the stock has recovered 27% from its all-time low in late April. Analysts are more optimistic about the company’s potential to build its fashion sector and form alliances with international companies looking to expand in India.
In an interview with Bloomberg Television last week, Morgan Stanley strategist Ridham Desai said, “These companies have gone through a period of consolidation and have re-looked at some of their business models to focus more on profitability.”
