The share price of India’s 11 new-age tech companies, including Nykaa, Paytm, Policybazar, and Zomato, among others, is likely to be under pressure as $14 billion worth of locked-in shares in these newly listed tech companies will be available to be sold in the market, data from Bloomberg shows.
Leading investors, the likes of Warren Buffet and Masayoshi Son, who had made pre-IPO bets in these companies, are expected to exit or sell part of their holdings, experts told businessline.
Lock-in period
Rules in India required a 1-year lock-in period for pre-IPO investors when these companies got listed. That lock-in for at least 11 companies ends in the next few days, and hence it is feared that leading investors will dump all or part of their holdings in the market. These so-called tech companies were promoted as clones of Amazon, Alibaba, or Uber, but they have lost appeal among investors, which has seen their share price decline by 50 to 75 per cent from peak levels. When they were listed, these tech companies enjoyed a price-to-earnings multiple of between 500 and 2,000, which was unheard of in India.
“Such companies draw investors when the money flow is abundant. But there is a squeeze now due to US rate hikes and breaks on stimulus. Also, these companies are unlikely to see big profits for a few good years. That makes them a bad bet for anyone. In the circumstances, it is a given that those shares remained locked-in for long will look for an early exit now,” said SP Tulsian, founder of SP Tulsian Investment Advisory.
Shares down
The share price of Paytm, listed under the name One 97 Communications, is down 70 per cent from its IPO price. Paytm closed at ₹651 on Monday, against the IPO price of ₹2,150. The company was backed by global investors including Son’s SoftBank Group Corp., Buffett’s Berkshire Hathaway Inc. and Jack Ma’s Ant Group Co.
Policybazar, or PB Fintech, is down 60 per cent from its IPO price. Zomato is down 15 percent from its IPO price, and the stock has more than halved from its high of ₹169. The share price of Nykaa or FSN E-commerce Ventures is hovering near its IPO price of ₹1,125 but has crashed badly from its high of ₹2,574.
“These companies are still attractive at a price. I believe that profits may be down, but they are growing in some sense in terms of business. So at some price, attraction would return and the selling will largely be absorbed,” said Samir Arora, founder and fund manager of Helios Capital.
Moving up
Among other companies, the shares of Latent View Analytics, Tarson Products, and Go Fashion will complete their first-year of listing between November 23 and November 30. Except for Tarsons Products, which is up 9 per cent, shares of Latent View and Go Fashion have gained over 90 per cent so far against their respective IPO prices.
Sigachi Industries, SJS Enterprises, Delhivery, Sapphire Foods, and Paytm will also complete their one-year of listing by November 18 or 20.