The worsening global outlook has led several investors to book profits in high-profile consumer and tech stocks that debuted with inflated valuations in the last fiscal.
Data compiled by Prime Database shows that compared to their offer price, the worst performing IPOs of fiscal 2022 are Suryoday Small Finance Bank ( down 72.5% from its offer price), Paytm ( down 66.8% compared to its offer price), Carwale ( down 58%), Fino Payments Bank ( down 54.8 percent), Policybazaar ( down 53.4 percent), Windlas Biotech ( down 52.8%) AGS Trans Technologies ( down 52.08%) and Zomato ( down 42.10 percent).
Of these, five were major tech IPO launches of 2021 — Zomato, Paytm, Nykaa, Fino Payments Bank, Policy Bazaar and CarTrade. Investors have turned cautious as the ongoing events globally has changed their appetite for new age growth stocks to traditional defensive stocks.
Paytm, which was the poster boy for India’s tech startups, has lost over two-third of its value since its IPO and become a symbol of the industry’s crash. From an offer price of Rs 2150 in November 2021, the stock is down 66.8% as of 27 July 2022 to trade at Rs 713.65. On its debut itself, the stock was down 27%. Skeptics say profitability will remain an uphill battle. Analysts at Macquarie Capital Securities (India) Pvt., who were early to predict Paytm’s stock decline, said in March that the shares would plummet further to Rs 450. The stock is down 46% year to date.
Paytm’s stock-price collapse exacerbated a crisis for India’s startups, sending valuations plummeting as investors began to grow cautious about their earnings potential.
Young firms — dozens of which had hit unicorn status as capital flowed to everything from online retail to digital learning in the country of 1.4 billion — suddenly saw their fundraising plans grind to a halt. To make matters worse, the war in Ukraine and fears of a global recession further clouded the picture for startups worldwide.
Zomato: Shares of Indian food delivery company Zomato fell more than 14% to a record low last week, as the one-year share lock-in period for promoters, employees and other pre-IPO investors expired following the 2021 listing. Zomato has had the most significant share price decline of the six companies, as investors lost roughly 66% of the total value of their investments a year ago. The stock is down 67% year to date.
The stock is down 42% since its debut in July 2021. As of 27, July, 2022, the stock was trading at Rs 43.95 from its offer price of Rs 76. Zomato is scheduled to report its first-quarter results today. The company had reported a 75% jump in fourth-quarter (Q4FY22) revenue, while gross order value (GOV), the total value of all food delivery orders on its online platform, surged 77% from the year-ago quarter.
“From the exuberance seen at the time of listing last year, Zomato is now unloved, having underperformed peers on a year-to-date basis. Blinkit acquisition elongates path to profitability and despite management guidance on a break-even in food delivery, investors are not giving it much benefit of doubt. We think this makes for a great case for long-term investors to ‘buy’ the stock,“ Jefferies said in a note recently.
CarTrade: The Initial Public Offer (IPO) of this tech company was launched in in August 2021 at a price band of Rs 1585 to Rs 1618 per equity share. The issue opened at a discounted price and has been under sell-off heat since listing. CarTrade share price today is ₹690 per share, which is around 57 per cent lower from its issue price. The stock is down over 58% from its issue price of Rs 1618.
Fino Payments Bank: The fintech, which essentially provides businesses with technical banking solutions, is down 54.8% as of 27 July, 2022 from its offer price of Rs 577 on 29 November 2021. The stock is currently trading at Rs 260.55
PolicyBazaar: The stock of Gurugram-based PB Fintech — the parent of insurance aggregator PolicyBazaar — has lost over 50% since its debut on 1 November 2021. The stock is down 53.1% at Rs 457.60 from its offer price of Rs 980.
Nykaa: Shares of FSN E-Commerce Ventures Ltd, the parent company of Nykaa, have fallen nearly 37% since its listing in November 2021, Though, Nykaa shares are up over 27% gains from its IPO issue price of Rs1,125 apiece, the beauty retail company founded by entrepreneur Falguni Nayyar, is down 45% from its record high price.
Last year India was flooded with ample liquidity thanks to low interest rates globally, which drove up prices of these new-tech companies. Now there is a liquidity crunch crunch and a continuous rise in interest rates , and so the shares of these companies have taken the biggest hit. In fact 2021 was an abnormal year that witnessed Indian startups raise about $42 billion in funding and the emergene of about 46 unicorns in one year as global investors lined up to throw money into India. But 2022 has witnessed a surge of startup issues as funding as dried up-mass layoffs, investor exits, piling losses seems to be the theme this year.
“The Indian startup ecosystem is likely to witness a shift in the pace and quality of venture capital deals in the near future. This is also an opportunity to the start-ups that are burning cash to streamline their operations and adopt a more focussed-approach to ensure profitabilit…Investors are a little wary due to the current environment and have become more decisive about the startups they want to nurture and are focusing extensively from a long-term gain perspective,” said Mohamad Faraz, Founding Partner, Upsparks, a Micro VC firm who has seed-funded over 50 companies in the last 2 years.
With inputs from Bloomberg