New-age tech stocks turn favorite among mutual funds. Check out their top picks
Swiggy shares, which had seen good demand especially from mutual funds during the anchor allocation round, made a decent debut on Dalal Street today. Mutual funds invest a small portion in these companies to avoid missing out on potential business model success despite the risks, experts say.
Swiggy, India’s second-largest consumer app, made its debut on Dalal Street on November 13. Despite steady revenue growth, investors' reaction to its IPO was muted due to the company's continued losses and competitive nature of the business. However, listed new-age technology stocks are, of late, finding favour among institutional investors who are looking to bet on them for the long term. As of October 31, the market value of mutual fund holdings in these companies nearly tripled to Rs 74,223 crore, up from Rs 25,051 crore seen last year. Unlike asset-heavy traditional companies, new-age companies bet on innovative business models that leverage technology to enhance their operations.
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Seven out of 17 new-age tech stocks that are listed on the bourses have delivered negative returns since listing, data available with stock research platform ACE Equity shows. Deepak Jasani, Head - Retail Research, HDFC securities says, “Most of these companies are loss-making but aiming for operating profit, with future results indicating the timeline for profitability. Regulatory actions, such as those from RBI or the government can impact these companies, especially in the fintech space. Fresh competition from incumbent players and existing players that are entering the business can also pose challenges.”
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The business models of these companies are complex, and profitability may take longer to achieve, making them less appealing to retail and HNI (high net worth individual) investors, explained Jasani. These investments are seen as medium to long-term holdings, with hopes for business model success and value unlocking in two-five years. Mutual funds invest a small portion in these companies to avoid missing out on potential business model success, despite the risks. Qualified institutional buyers (QIBs) may still invest due to their ability to interpret complex models and take long-term risks, Jasani added.
New-age companies do not fit into a single category and come from various sectors. “India’s fintech and new-age tech sectors have shown strong momentum, which is determined by rapid digital adoption and government initiatives like demonetisation and GST,” says Trivesh, COO, Tradejini, an integrated online stock trading platform. The fintech domain is thriving, especially in countries with younger populations, like India, where digital adoption is accelerating. They are leveraging this digital wave to expand rapidly. Also, digital infrastructure, powered by AI (artificial intelligence) and machine learning holds immense potential to revolutionise sectors like healthcare, education, and finance, driving India’s growth to new heights, added Trivesh. Here are new-age tech companies where mutual funds hold notable allocations in their portfolio. Source: ACEMF.
Company Name: Zomato Sector: e-Commerce Date of Listing: 23-Jul-2021 Return since listing (point-to-point): 105.3% No. of MF schemes held: 341 Value of MF holdings: Rs 31,080 crore
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Company Name: PB Fintech Sector: Fintech Date of Listing: 15-Nov-2021 Return since listing (point-to-point): 38.6% No. of MF schemes held: 188 Value of MF holdings: Rs 10,641 crore
Company Name: FSN E-Commerce Ventures Sector: e-Commerce Date of Listing: 10-Nov-2021 Return since listing (point-to-point): -50.3% No. of MF schemes held: 129 Value of MF holdings: Rs 9,188 crore
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Company Name: Delhivery Sector: Courier Services Date of Listing: 24-May-2022 Return since listing (point-to-point): -35.9% No. of MF schemes held: 105 Value of MF holdings: Rs 6,695 crore
Company Name: One97 Communications Sector: Fintech Date of Listing: 18-Nov-2021 Return since listing (point-to-point): -47.5% No. of MF schemes held: 81 Value of MF holdings: Rs 4,582 crore
Company Name: Go Digit General Insurance Sector: Insurance Date of Listing: 23-May-2024 Return since listing (point-to-point): 9.1% No. of MF schemes held: 57 Value of MF holdings: Rs 2,116 crore
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Company Name: Honasa Consumer Sector: Trading Date of Listing: 07-Nov-2023 Return since listing (point-to-point): 12.8% No. of MF schemes held: 56 Value of MF holdings: Rs 529 crore
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Company Name: Netweb Technologies India Sector: IT - Hardware Date of Listing: 27-Jul-2023 Return since listing (point-to-point): 210% No. of MF schemes held: 41 Value of MF holdings: Rs 784 crore
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Company Name: CE Info Systems Sector: IT - Software Date of Listing: 21-Dec-2021 Return since listing (point-to-point): 4.9% No. of MF schemes held: 37 Value of MF holdings: Rs 567 crore
Company Name: OLA Electric Mobility Sector: Automobile Two & Three Wheelers Date of Listing: 09-Aug-2024 Return since listing (point-to-point): -18.5% No. of MF schemes held: 37 Value of MF holdings: Rs 1,610 crore
Company Name: RateGain Travel Technologies Sector: IT - Software Date of Listing: 17-Dec-2021 Return since listing (point-to-point): 145.5% No. of MF schemes held: 37 Value of MF holdings: Rs 1,695 crore
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Company Name: Brainbees Solutions Sector: e-Commerce Date of Listing: 13-Aug-2024 Return since listing (point-to-point): -22.5% No. of MF schemes held: 36 Value of MF holdings: Rs 2,760 crore
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Company Name: Easy Trip Planners Sector: Travel Services Date of Listing: 19-Mar-2021 Return since listing (point-to-point): 142.7% No. of MF schemes held: 27 Value of MF holdings: Rs 11 crore
Company Name: CarTrade Tech Sector: Automobiles - Dealers & Distributors Date of Listing: 20-Aug-2021 Return since listing (point-to-point): -18.9 No. of MF schemes held: 25 Value of MF holdings: Rs 921 crore
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Company Name: Awfis Space Solutions Sector: Diversified Commercial Services Date of Listing: 30-May-2024 Return since listing (point-to-point): 84.3% No. of MF schemes held: 22 Value of MF holdings: Rs 501 crore
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Company Name: Zaggle Prepaid Ocean Services Sector: Fintech Date of Listing: 22-Sep-2023 Return since listing (point-to-point): 173.4% No. of MF schemes held: 17 Value of MF holdings: Rs 357 crore
Company Name: Unicommerce eSolutions Sector: IT - Software Date of Listing: 13-Aug-2024 Return since listing (point-to-point): -6.2% No. of MF schemes held: 15 Value of MF holdings: Rs 188 crore
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