Despite a mixed September quarter (Q2FY25) for Indian corporates, several new-age companies like Zomato, PB Fintech, and FSN E-Commerce Ventures (Nykaa) have delivered impressive financial results. However, analysts are urging investors to exercise caution before jumping into these stocks, citing market uncertainty and the need for sustained performance over subsequent quarters.
Performance highlights
Zomato posted remarkable growth with its profit after tax (PAT) soaring fivefold to ₹176 crore, compared to ₹36 crore in the same quarter last year. Its revenue from operations surged 69% year-on-year (YoY) to ₹4,799 crore, showcasing strong operational resilience.
PB Fintech, the parent of Policybazaar and Paisabazaar, turned profitable, reporting a net profit of ₹51 crore, a significant turnaround from a ₹21 crore loss in Q2FY24. Revenue for the company increased by 43.8% to ₹1,167.23 crore, reflecting its growing foothold in the fintech sector.
Nykaa, while reporting healthy growth, missed market estimates. The company’s consolidated net profit rose 72% YoY to ₹10.04 crore, up from ₹5.85 crore in the previous year. Its revenue grew 24.2% YoY to ₹1,874.74 crore, driven by sustained demand for its beauty and fashion products.
Conversely, One 97 Communications, the parent of Paytm, struggled during Q2 but has seen a 11.9% rally in its stock price post-results, reflecting renewed investor confidence.
Market reactions
Since their Q2 results were announced:
- Zomato (results on 22 October) has gained 5.2%.
- PB Fintech (5 November) also climbed 5.2%.
- Paytm (22 October) rallied 11.9%.
- In contrast, Nykaa (12 November) shares dropped 3.8%, while Ola Electric (8 November) fell 3.6%.
Analysts advise caution
Despite these gains, analysts remain cautious about new-age stocks. G Chokkalingam, founder of Equinomics Research, believes the growth potential of these companies is already factored into their stock prices. “The growth in new-age companies was largely perception-driven at the time of their listing, rather than being rooted in fundamentals. I don’t see a strong buying opportunity for at least the next two or three quarters,” he noted.
Independent market analyst Ambareesh Baliga echoed similar sentiments, advising investors to wait for sharper price dips before considering long-term positions. “New-age firms started on a lower profitability base. While their operational performance has improved, most positives are already priced in. Investors should remain on the sidelines for now,” he said.
More Read
Challenges for Nykaa and others
Nykaa, despite a strong profit growth of 72%, faced a selloff as its results fell short of market expectations. Analysts pointed out that while the numbers are encouraging, the stock valuation may not justify the current price levels.
Sustainability concerns
The underlying concern among analysts is whether these companies can sustain their operational momentum. With market volatility and macroeconomic headwinds, the robustness of their business models will be tested in the coming quarters.
“Investors should adopt a wait-and-watch approach,” advised Baliga. “Use corrections in stock prices to accumulate positions, but only for the long term.”
The long-term view
While new-age companies have showcased significant improvements, their stocks are still viewed as volatile. Analysts suggest that the current market enthusiasm should not overshadow the necessity for consistent performance.
The advice for investors remains clear: exercise caution, wait for price corrections, and prioritise a long-term investment horizon. For now, patience appears to be the most prudent strategy in navigating the evolving landscape of new-age stocks.
