Investors in five platform stocks — Paytm, Zomato, Delhivery, Policybazaar and Nykaa — have lost over `2 trillion since their initial public offerings (IPOs).
One 97 Communications, Paytm parent, has seen one of the biggest drops in its market cap since its IPO — it has lost 65% or Rs 66,169 crore. Online insurance player Policybazaar has lost the maximum in percentage terms. Its market cap has tanked by 69% or Rs 37,277 crore. In value terms, beauty e-tailer Nykaa has been the biggest loser after Paytm with market cap down at Rs 51, 469 crore.
Market analysts say that the main reasons for this massive loss are high valuations that left nothing on the table for investors and the exit of anchor investors after the mandatory lock-in period. “With anchor investors beginning to reduce their stakes in these firms, there is no one to hold on to the prices of these companies. In addition, investors are uncomfortable with continuing high rate of cash burn,” said a mutual fund manager who did not wish to be named.
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Earlier this week, Lighthouse India Fund III sold shares of FSN E Commerce Ventures, the parent company of Nykaa. The lock-in period of Nykaa’s pre-IPO investors ended last Thursday (November 10).
On Friday, Citi will launch a deal to sell Nykaa shares worth Rs 1,000 cr via block deal. The offer is up to 0.5% discount to current market price. The seller is TPG Capital.
Shankar Sharma, joint MD of First Global, in a recent interview with FE, said, “Most new-age companies are really poor-quality businesses. And there shouldn’t have anywhere close to that kind of valuations.”
According to him, the pricing of these IPOs was extremely exorbitant, but some people are still pushing them after losing 50-60% of their values. “These companies had no business having market caps of Rs 100,000 crore. Now, they are at Rs 50,000 crore, people are saying ‘oh, it is cheap’. Companies with revenues of Rs 2,000-3,000 crore and negligible profits shouldn’t have such market caps in the first place,” he added.
Most market experts believe that such companies will have to do a reality check before coming to the market. The global recession and end game for cheap money will make things difficult for them.