After being out of the market since the last 8 months, I have been investing since the last week. I have been surprised by the resilience of India markets. While cyclical stocks have done very well, new age tech stocks were hammered beyond imagination. India has followed the rest of the world markets in discounting high growth tech stocks. Inflation at multi decade high, Fed tightening aggressively and liquidity crunch, all combined, have led to discount in valuation multiples of high growth stocks. All of these factor are likely to mellow down in next 6 months.
Being a contrarian, I am inclined to invest in these stocks which are available at very attractive valuation. Trying to catch a falling knife, I may be very early and go through painful drawdowns.
Current Portfolio Composition:
Stock : Allocation : Avg Price
PAYTM : 56% : 508
PB Fintech : 24% : 387
NYKAA : 20% : 172
Current revenue growth rate, Expected growth rate, EV/FY 24 Sales
Paytm : 60-70% , 50%, 3x
PB Fintech : 60-70%, 50%, 6x
NYKAA : 40-50% , 40%, 6x
Quality, Execution
PAYTM : Questionable, Bad before IPO, good after IPO
PB Fintech: Not sure, Good
NKYAA : Excellent, Excellent
All of the three stocks have been going through a forced selling phase as PRE-IPO investors take their stakes down. High volumes also indicate capitulation phase. News flow is very negative and sentiments against no-profit companies is very bad. It is complete opposite of what I observed 12 months back. Sentiments are cyclical, this too shall pass! High growth in revenues with a path to profitability is how new tech companies become behemoth. Execution remains the most important aspect in such business.
PAYTM is available at very attractive valuation ( Same as Alibaba, Ant financials) in a good growth market like India. I am not sure about management here and suspicious of internal holding structures where VSS seem to benefit more than PAYTM. I would likely take my exposure down in this. I got very enthused by the last quarter result and deliverables there and increased my exposure to a point which looks unreasonable.
NYKAA is an excellent story and is capturing a market where biggies (AMAZON, MYNTRA etc) have outright failed. Execution is the key and management has shown excellent execution capability. I would like to increase exposure here.
PB Fintech is the largest digital player in insurance policy distribution and are already EBITDA positive pre-ESOPs.
All of the three have very large run-way. Execution is the key as disruptions are so common.
I have cash to deploy and would consider ZOMATO and DELHIVERY for further addition into the portfolio.
Inspired by discussions on your thread. Would love your opinion here
Thanks
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