Paytm, Nykaa shares slump amid market correction, hit new 52-week lows; ICICI Securities says Buy Paytm stock

Paytm stock has fallen more than 60% from its high, while Nykaa is down 42% from record highs. Today, Paytm stock fell 2.2% to an intraday low of Rs 815.10; Nykaa fell 4.4% to Rs 1337.45 intraday.

Shares of One 97 Communications Ltd, Paytm’s parent company, and FSN E-Commerce Ventures Ltd, Nykaa’s parent firm, hit fresh record lows on Monday as the stocks of newly-listed tech-platforms continued to correct. Paytm stock has fallen more than 60% from its high, while Nykaa is down 42% from record highs. Today, Paytm stock fell 2.2% to an intraday low of Rs 815.10; Nykaa fell 4.4% to Rs 1337.45 intraday. Even amid this selloff, brokerage ICICI Securities initiated coverage on Paytm stock with a Buy rating and a target price of Rs 1,352 apiece.

Paytm stock is down as the markets are not bullish anymore in comparison to last year, and hence the loss making firm is seeing sell off amid correction in markets, Vishal Wagh, Head of Research at Bonanza Portfolio, told Financial Express Online. The stock is also down because of the expected listing of state-run Life Insurance Corporation which could lead to a crunch in liquidity, he added.

Paytm stock rating: ICICI Securities initiates coverage with ‘Buy’ rating

Even amid the selloff, ICICI Securities has initiated coverage of Paytm stock and said it sees the contribution margin to be about 40% by financial year 2024, and 46% by 2026. Aided by this contribution margin, there is some visibility of EBITDA getting into positive territory post financial year 2026, the brokerage said.

“Paytm calls for evaluation and assessment quite differently and distinctly, especially given: 1) Management’s high growth aspirations calling for significant investments and cash burn. 2) Rapidly evolving business model (proven leadership in payments but monetising it through financial services still at a nascent stage. 3) Highly competitive landscape with low switching cost and leading players with deep pockets getting aggressive. 4) Regulatory uncertainties exist, some conducive and few unfavourable outcomes,” the brokerage said.

Tech-led platforms witness selloff

From 52-week highs of Rs 2,574 a share, shares of Nykaa’s parent company have corrected. Shares of Zomato Ltd, Cartrade Tech Ltd, PolicyBazaar’s parent co PB Fintech Ltd were also down on stock indices on Monday. Zomato stock is down 2.85%, PB Fintech Ltd’s is down 2.33% and Cartrade Tech’s stock is down 3%.

Shares of tech-led platforms have been overvalued at the time of listing, now as overall reality catches on, they are seeing right valuation, Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst and founder, Gemstone Equity Research & Advisory Services, told Financial Express Online.

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