Buying spree: Zomato, Nykaa among top mutual fund additions in April

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26 Aug, 2025 12:21

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Bottom-fishing in new-age tech stocks continues as mutual funds lapped up shares of Zomato and Nykaa in April, too. While they bought shares of Paytm as well, the quantum was not as large as Zomato and Nykaa.

As per Prime Database, mutual fund houses net bought Rs 676 crore worth shares of FSN E-Commerce Ventures from the market and Rs 385 crore of Zomato shares in the month gone by. In fact, both Zomato and Nykaa feature in the top 10 list with large-cap names like Infosys, Hindustan Unilever, Bajaj Finance and Reliance Industries.

The net buy for Delhivery shares was Rs 189 crore and just about Rs 3 crore for One97 Communications.

As on April 2023, mutual funds held 7.14 percent of the total share capital of Nykaa, 7.28 percent of Zomato, 13.36 percent of Delhivery and 2.71 percent of Paytm.

Also Read: Mirror, mirror on the wall, does the Nifty @ 18,300 have it all?

The buying spree started in November when pre-IPO investors’ lock-in period expired and the likes of Softbank, TPG Growth, and Tiger Global began paring their stakes in these companies. Despite the 50-60 percent wealth erosion in new-age stocks since listing, these pre-IPO investors were sitting on handsome gains as they had acquired shares at negligible value.

Does this mean valuations of new-age tech companies are now cheap? Not quite.

“Chances of a ‘right to win’ are high for some of the new-age tech companies. Their valuations are still certainly not cheap, but they are ‘okay’,” said Sailesh Raj Bhan, Chief Investment Officer (CIO), Equity Investments, at Nippon India Mutual Fund, at a media meet last month.

Nippon India MF, Motilal Oswal MF, Kotak MF, and SBI MF were some of the fund houses that bought new-age tech stocks in April.

“The ‘adjusted profitability’ story could be making fund managers positive on these stocks. Zomato and Paytm also have 100 percent public shareholding, or high float, which gives enough room to fund managers to keep increasing stakes while keeping the market price in check,” said Aditya Shah of JST Investments.

While Nykaa was profitable pre-listing, Paytm reported its first-ever adjusted EBITDA profitability in the quarter-ended December 2022 and Zomato (ex- Blinkit) turned adjusted EBITDA positive in the month of January 2023.

Most brokerages are also screaming ‘buy’ for new-age stocks. HSBC Global’s target on Zomato at Rs 87 indicates a 38 percent upside from the current level. JM Financial sees Nykaa at Rs 230 over the next 12 months, indicating a 95 percent upside. Goldman Sachs has a ‘buy’ rating on Paytm with a target at Rs 1,150.

But, not everyone is gung-ho. With competition rising, some money managers believe it is difficult to make a valuation case for these stocks even at these lower prices.

“Zomato’s turf is being invaded by government-backed ONDC and Nykaa is facing increased competition from deep-pocketed Reliance Retail’s Tira. Though, as incumbents, both Zomato and Nykaa enjoy benefits of early market penetration, India is a price-conscious mass market and customer loyalty is rare,” according to Manu Rishi Guptha of MRG Capital.

For now, retail investors might be better off to be on a wait-and-watch mode.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.