Foreign Investors Flock to India’s New-Age Tech Stocks: Here’s Why

The new-age tech stocks such as Zomato, Paytm, PB Fintech, Nykaa, Delhivery, and their contemporaries have been the cynosure of foreign investors’ eyes over the past year. These companies, once under scrutiny for their business models, are now showcasing commendable growth combined with operational efficiencies.

Foreign Portfolio Investors (FPI) Elevate Their Game

In an intriguing turn of events, the Foreign Portfolio Investors (FPI) have augmented their shareholding in these burgeoning tech companies, as evidenced by the June quarter shareholding pattern.

• This influx of strategic investments is particularly noteworthy, given that many of these companies, often labeled as ‘overvalued’ and operating at a loss, are now registering robust revenue growth and a significant reduction in losses.

For instance, One97 Communications, the umbrella company of Paytm, witnessed its FPI stake soar to 16.86% by June 2023, a substantial leap from 5.45% in June 2022. Similarly, Zomato’s FPI shareholding surged to 33.33% in June 2023, up from a mere 9.85% the previous year.

Business Prospects Brighten, Restoring Foreign Investor Confidence

The rejuvenated business prospects of these tech giants have rekindled the confidence of foreign investors. With enhanced operating efficiencies, strategic cost-cutting, and the development of new revenue channels, these companies are on the cusp of profitability.

• In a landmark achievement, Zomato reported profitability for the first time in Q1FY24.
• The food aggregator, in its June 2023 quarter, posted a consolidated net profit of ₹2 crore, a stark contrast to the ₹186 crore loss in the corresponding quarter the previous year.
• Likewise, Paytm slashed its net loss in Q1FY24 to ₹357 crore from ₹644 crore YoY, while PB Fintech reduced its consolidated loss by a whopping 94% to ₹11.9 crore from ₹204 crore YoY.

This stellar performance is mirrored in their share prices. Over the past year, Zomato’s share price surged by over 44%, Paytm’s by over 66%, and PB Fintech’s by more than 44%.

The trajectory of these new-age tech companies is a testament to their resilience and adaptability. As they continue to evolve and refine their business models, it will be intriguing to see how they shape the future of the tech industry in India.

What are your thoughts on this upward trend? Do you believe this momentum will sustain?