Are New Age Tech Companies Recovering? Detailed Analysis of New Age Stocks

by Madhav Agarwal, Siddharth Singh Bhaisora

Published On June 30, 2024

In this article

The landscape of technology stocks, often referred to as New Age Tech Stocks, is rapidly evolving, driven by innovations and the increasing integration of technology into everyday life. These stocks represent companies that are at the forefront of technological advancements, offering cutting-edge products and services across various sectors such as digital maps, fintech, e-commerce, online food delivery, logistics, and more. In India, this sector has seen significant growth, with several companies making notable strides in their respective fields.

What are New Age Tech Stocks?

New Age Tech Stocks refer to shares of companies that operate in the technology sector, focusing on innovative and high-growth areas. These companies often leverage new technologies like artificial intelligence, machine learning, the Internet of Things (IoT), and blockchain to create unique products and services. They are characterized by their rapid growth, high market valuations, and significant potential for disrupting traditional industries. Examples include companies in digital mapping, fintech, online marketplaces, food delivery services, logistics, gaming, and cloud computing. Here is the one-year return performance of new age technology stocks.

Note: Honasa Consumer i.e Mama Earth was listed on Nov 2023

What is happening with New Age Stocks in June?

In June, Indian New Age tech stocks continued their upward trend, driven by the broader market rally following the return of the NDA government to power. 15 of the 23 new age tech stocks gained between 0.05% and 29% in the 3rd week of June alone.

  • Coworking space provider Awfis reported its first financial results since its listing. The startup turned profitable in Q4 FY24, posting a consolidated profit of INR 1.4 Cr. Following this announcement, Awfis' stock jumped. In the last 1 month it is up 22%

  • Other notable gainers included MapmyIndia (19.5%), PB Fintech (18%), Fino Payments Bank (6.5%), Tracxn (10.47%), Zomato (9%), and Nykaa (8.9%)

  • While Paytm is up around 11% in the month, it hasn't done as well in the last few days of trading.

  • Meanwhile Delhivery has given negative returns and hasn’t performed well in June.

  • Finally, online travel aggregator Ixigo became the latest new-age tech startup to go public last week. It gave significant listing gains however since listing has fallen around 5.4%

    Let's deep dive into some of these new age tech companies in depth and see if they are recovering and why some of them are rallying.

    Detailed Analysis of New Age Stocks in India

    New Age Stock #1: MapmyIndia’s Strong Competitive Advantage

    MapmyIndia (CE Info Systems) was incorporated in 1995, is a leading provider of digital maps, geospatial software, and location-based IoT technologies in India. Its business is split between Map and Data Products (60% of revenue) and Platform and IoT products (40%). The company's open order book has grown significantly by 49% to Rs 1,364 Cr, indicating robust future growth potential. In the March quarter of FY24, MapmyIndia reported a 35% increase in its consolidated profit after tax (PAT), reaching INR 38.2 Cr compared to INR 28.3 Cr in the same quarter last year. Operating revenue grew 47.5% to INR 106.9 Cr from INR 72.4 Cr in Q4 FY23.

    Key Drivers:

    1. MapmyIndia's advantageous early market position in high-growth sectors like automotive navigation, mapping devices, connected vehicles, telematics, and government digitisation gives them a significant first mover advantage & competitive advantage.

    2. The sharp rise in MapmyIndia's stock on 21st June came after Goldman Sachs initiated its coverage with a ‘buy’ rating and a target price of INR 2,800.

    3. Analysts are forecasting a CAGR of 38% for MapmyIndia in the FY24-FY27 period, with a steady EBITDA margin in the 38% to 41% range.

    With its established market position and continued adoption of its services across various segments, MapmyIndia appears well-positioned in the expanding digital mapping and location-based services sector in India.

    New Age Stock #2: A Bullish Outlook for Policybazaar & Paisabazaar

    PB Fintech Ltd operates the well-known brands Policybazaar and Paisabazaar, is India's leading online platform for insurance and lending products. For the fiscal year, PB Fintech reported a remarkable turnaround with a profit after tax of ₹64 crore, a substantial improvement from the previous year's loss. Revenue grew by 34% to ₹3,438 crore, with the core online marketplaces seeing even stronger growth of 39%. The company's focus on operational efficiency is evident in the improved adjusted EBITDA margin for its core businesses, which rose from 6% to 14%.

    Key Drivers

    1. Successful execution of its phy-gital strategy.

    2. EPS estimate increased to 20 times for FY32, up from 18 times.

    3. Expected sustained growth in retail health, term, and motor insurance premiums in Q1 FY25.

    4. Continued improvement in point-of-sale and EBITDA margins.

    5. Revival in disbursements for Paisabazaar is anticipated.

    Potential Risks

    1. Premium growth slowdown could impact revenue.

    2. Higher marketing or brand expenses could affect profitability.

    With a growing trail revenue and an optimistic outlook, PB Fintech aims to outpace market growth rates by 2-2.5 times, while also expanding into the healthcare sector and addressing industry challenges to enhance customer experience.

    New Age Stock #3: Zomato is Profitable & Hungry For New Acquisitions

    Zomato's platform primarily focuses on food delivery but has diversified its offerings to include quick commerce, dining-out services, and B2B supplies. In FY24, Zomato's business mix showed a strong dominance of food delivery, accounting for 63% of its gross order value, followed by quick commerce at 24%, with going out and B2B supplies each contributing 6%. The company demonstrated robust financial performance in FY24, with revenue surging to ₹13,545 crore, marking an impressive 56% year-over-year growth. Notably, Zomato achieved a significant milestone by turning profitable, reporting a profit after tax of ₹324 crore.

    Key Business Drivers:

    1. Quick commerce, which grew over 100% YoY in 2023, will be a highly attractive segment for growth and margins going forward for Zomato (under its subsidiary Blinkit).

    2. Zomato is in talks to acquire Paytm’s events and movie ticketing business, Paytm Insider - estimated deal size of INR 1,500 Cr. If the acquisition materializes, it could significantly enhance Zomato’s revenue by bolstering its ticketing and entertainment segment, positioning it as a strongest competitor just behind market leader BookMyShow. Following the acquisition talks, Zomato’s shares jumped 4.24% immediately, ending this week at INR 199.10.

    Zomato’s market leadership in key segments driven by solid execution in under-penetrated markets. This shift to profitability, coupled with accelerated cash generation over the last four quarters, signals a positive trend in the company's financial health and operational efficiency, positioning it well for sustained growth in the competitive online food service and quick commerce sectors.

    New Age Stock #4: Nykaa Fashion Aims for Aggressive Growth

    Nykaa expects its fashion business, Nykaa Fashion, to turn EBITDA positive by the end of FY26. During Nykaa’s ‘Annual Investor Day’ event, NykaaMan CEO Nihir Parikh stated, “Our business is growing rapidly. We’ve managed to maintain our EBITDA at a level of negative 10%. By the end of FY26, we are confident that we will achieve positive EBITDA.” Currently, Nykaa Fashion’s EBITDA margin is -10.3% in FY24, with a goal to achieve mid-single-digit EBITDA margin by FY27 and 10% thereafter.

    Key Growth Metrics

    1. Nykaa has announced several strategic initiatives aimed at improving its delivery timelines. It plans to introduce express delivery services in metro cities are underway.

    2. Nykaa Fashion is addressing gaps in the premium platform market.

    3. Unique visitors, annual transacting customers, and orders are increasing, with improving conversion rates.

    4. The repeat customer ratio stood at 36-48% last fiscal year, with a target to increase this to 75-80% over the next few years.

    5. Expanded from 1,500 to 3,200 brands in recent years.

    6. Nykaa Fashion has outpaced the beauty and personal care (BPC) business in growth over recent quarters.

    In Fy24, BPC business’ gross merchandise value (GMV) grew by 25% YoY to INR 8,340.9 Cr in FY24 and the fashion business’ GMV grew by 27% YoY to INR 3,270 Cr in FY24. Nykaa’s management expects the fashion business to grow by 30-40% annually, potentially growing 2.5x over the next 3 years. This shows substantial growth opportunities for this segment of the business. In addition, Beauty & personal care business growth is anticipated to have a CAGR of mid-to-late 20% till FY28.

    New Age Stock #5: Mamaearth Shares Face Volatility

    Honasa Consumer, established in 2016, has rapidly emerged as India's largest digital-first beauty and personal care (BPC) company in terms of revenue for FY24. The company has successfully built a 'House of Brands' architecture, expanding beyond its initial Mamaearth brand. This diverse portfolio has strengthened HCL's position in the competitive BPC market. In Q4 FY24, Honasa demonstrated solid financial performance with revenue reaching ₹471 crore, representing a 21.1% year-over-year growth. The company achieved an EBITDA of ₹33 crore, maintaining a 7% margin. Notably, HCL reported its highest quarterly profit after tax (PAT) for the year at ₹30 crore, indicating improving profitability alongside its growth trajectory. Mamaearth’s shares face volatility:

    Key Events

    1. Major pre-IPO shareholders, Fireside Ventures and Sofina Ventures, offloaded 32.42 lakh shares each, worth INR 141.21 Cr and INR 141.06 Cr, respectively. As of March 2024, Fireside held 1.71 Cr shares, and Sofina held 1.99 Cr shares in Mamaearth

    2. Following the offloading on June 11, Mamaearth shares dropped nearly 5% that day and continued to fall the next day

    3. Mamaearth announced that its partnership with Reliance Retail has expanded, increasing its store count to 1,000 in Smart Bazaar and Smart Point stores

    Mamaearth has set ambitious revenue targets and aligned execution strategies across its brands following strong Q4 results. The Indian BPC segment is dynamic, with social awareness significantly influencing trends. Honasa's continuous efforts to drive growth and profitability across all its brands. These results reflect Mamaearth’s successful strategy in capturing market share in the rapidly growing digital-first BPC segment in India.

    New Age Stock #6: PayTM Losing Out

    One 97 Communications has been a pioneering force in India's digital payment and financial services landscape since its inception in 2000. However, Paytm faced a significant setback in early 2024 when the Reserve Bank of India (RBI) imposed severe restrictions on Paytm Payments Bank due to persistent non-compliance and material supervisory concerns. This regulatory action, which halted new deposits and credit transactions after February 29, 2024, forced Paytm into a rapid business restructuring, including migrating millions of accounts to other banks. The impact was substantial, with Paytm's stock price plummeting nearly 50% between January 31 and June 21, 2024. Paytm's stock fell 2% this week, ending a 2-3 week upward momentum. The company faced several challenges:

    Key Issues

    1. Amidst ongoing layoffs, ex-employees filed complaints with the Ministry of Labour and Employment, alleging "unlawful termination" without compensation and seeking reinstatement.

    2. Goldman Sachs (Singapore) PTE sold shares worth INR 183 Cr, and Marshall Wace Investment Strategies – Eureka Fund offloaded shares worth INR 25 Cr.

    Positive Developments

    1. Paytm announced a partnership with Samsung Wallet to facilitate bookings for flights, buses, movies, and events.

    2. Insurance Regulatory and Development Authority of India (IRDAI) accepted Paytm General Insurance’s registration withdrawal application. Paytm will now concentrate on distributing insurance products from other insurers.

    3. Additionally, there is a potential sale of Paytm Insider business to Zomato which aligns with Paytm’s strategy to focus on payments and financial services business. The expected cash from the sale could boost Paytm’s marketing efforts.

    This event highlighted the critical importance of regulatory compliance in the fintech sector and served as a cautionary tale for the industry, emphasizing the potential consequences of failing to address regulatory concerns adequately.

    New Age Stock #7: Netweb Technologies the Next NVIDIA?

    Netweb Technologies India, founded in 1999, is a leading provider of high-end computing solutions (HCS) in India. The company specializes in supercomputing, private cloud infrastructure, AI systems, and data center servers. With a diverse revenue mix led by supercomputing (36%) and private cloud solutions (37%) in FY24, NTI has shown notable growth, particularly in AI systems. The company's strong manufacturing capabilities, eligibility for government PLI schemes, and a robust order book of Rs. 411 crore with a Rs. 3,446 crore pipeline indicate a strong market position and growth potential in India's advancing high-performance computing sector. Netweb has experienced a 5x/9x growth in sales/PAT over FY21-24 and is expected to see a 45%/50% CAGR in sales/PAT over FY24-27.

    Industry trends:

    1. Rapid shift towards private cloud adoption and increased investment in data centers.

    2. Significant surge in spending on generative AI and supercomputing systems driving historic growth for HCS.

    3. Indian government initiatives promoting local manufacturing create a favorable environment for domestic players.

    Netweb’s ongoing commitment to research and development (R&D), allocating approximately 3.5-4% of its sales, enables it to identify gaps in end-consumer needs and market opportunities. Recent ventures into manufacturing network switches and 5G Open RAN (ORAN) technology further demonstrate its innovative approach. The company is seen as a proxy to AI and data center investments in India, with a total addressable market (TAM) of $13 billion, expected to grow at 14% CAGR over the next 5 years.

    Factors to Consider while Investing in New Age Stocks

    1. Market Potential: Assess the overall market potential and growth trajectory of the technology sector in India. This includes understanding the adoption rate of new technologies and the scope for expansion in domestic and international markets.

    2. Company Fundamentals: Analyze the financial health of the company, including revenue growth, profitability, debt levels, and cash flow. Strong fundamentals indicate a company's ability to sustain and grow its business.

    3. Innovation and Technology: Evaluate the company's commitment to innovation and its ability to leverage cutting-edge technologies to create competitive advantages. Companies that invest in R&D and have a robust pipeline of new products and services are likely to stay ahead in the market.

    4. Regulatory Environment: Understand the regulatory landscape and any potential risks associated with compliance. Regulatory challenges, such as those faced by Paytm, can significantly impact a company's operations and stock performance.

    Explore top new age stocks in fintech, green energy & other startups with our Innovation portfolio!
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    Risks Involved in Investing in New Age Stocks

    1. Market Volatility: Technology stocks can be highly volatile, with prices subject to rapid changes based on market sentiment, economic conditions, and technological advancements.

    2. Regulatory Risks: As seen with Paytm, regulatory actions can pose significant risks to tech companies. Compliance with regulations is crucial to avoid disruptions in operations.

    3. Competitive Pressure: The tech sector is highly competitive, with constant pressure to innovate. Companies must continually invest in technology and talent to maintain their market position.

    4. Economic Factors: Macro-economic factors such as interest rates, inflation, and currency fluctuations can affect the financial performance of tech companies.

    Why Invest in New Age Tech Stocks?

    1. High Growth Potential: New Age Tech Stocks often operate in high-growth sectors with substantial market potential. Investing in these companies can provide significant returns as they expand and capture market share.

    2. Innovation and Disruption: These companies are at the forefront of technological innovation, creating new business models and disrupting traditional industries. This innovation can lead to long-term growth and value creation.

    3. Diversification: Including tech stocks in a diversified portfolio can enhance overall returns and reduce risk. The technology sector often performs differently from other sectors, providing a hedge against market fluctuations.

    Positive Outlook for New Age Stocks in 2024

    Many tech companies engage in strategic partnerships and acquisitions to accelerate growth and expand their market presence. Evaluating these strategic moves can provide insights into a company's growth strategy and potential for value creation. For example, in November 2023, Netweb Technologies India Limited (Netweb) announced that it is now a manufacturing partner for the NVIDIA Grace CPU Superchip and GH200 Grace Hopper Superchip MGX server designs. This partnership significantly boosted investor confidence, showcasing Netweb's capability to collaborate with leading global technology firms and its potential to leverage advanced technologies for future growth.

    Analysts have also identified favorable macro and micro factors aligning to support share prices of new age growth stocks in India. For Macro economic factors we find multiple re-ratings for growth stocks and a competitive environment kept benign by tight PE/VC funding as key macro factors. Naturally, there appears to be a close correlation between the PE/VC cycle and the performance of Indian internet stocks. Strong execution as reflected in market share gains and margin improvements are critical micro factors driving a positive profit improvement cycle across these new age stocks. Looking forward, look for new age stocks with strong revenue growth momentum which have strong profitability.

    Explore top new age stocks in fintech, green energy & other startups with our Innovation portfolio!
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    Should you invest in New Age Stocks?

    The emergence of New Age Tech Stocks in India highlights the dynamic and transformative nature of the technology sector. These companies have demonstrated robust financial performance, strategic expansion, and adaptability in the face of challenges, positioning themselves as leaders in their respective domains. With a strong emphasis on innovation, customer-centric solutions, and operational efficiency, they are well-equipped to sustain their growth trajectories and continue driving the evolution of the Indian technology landscape.

    As investors look to capitalize on the growth potential of New Age Tech Stocks, it is crucial to recognize the importance of regulatory compliance, strategic vision, and adaptability in navigating the rapidly changing market dynamics. The continued advancement of technology and its integration into various aspects of life will undoubtedly provide new avenues for growth and investment opportunities in the Indian tech sector.

    Want to know more about the new age stocks? Read these interesting indepth articles to know more:

    1. Investing in India's New Age Sectors: A Public Stock Market Perspective
    2. Top New Age Stocks: Delhivery, Zomato, PayTM, Easemytrip & Nykaa

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