As Paytm faced regulatory action in the March quarter, many of its shareholders sought quick exits, causing the company's stock price to hit new lows. However, Norway's Government Pension Fund, the world's largest sovereign fund, saw an opportunity and acquired a significant position in the company during that period.
In recent quarters, several major sovereign and pension funds have invested in new-age companies like Paytm, Zomato, Policybazaar, Mamaearth, and Nazara, as per regulatory filings.
The biggest player of the lot has been the Norwegian fund, which manages assets valued at around $1.6 trillion worldwide. It held more than 10 crore shares of Zomato, 47 lakh shares in Policybazaar, and 85 lakh shares in Paytm at the end of the March quarter.
Bulk deals data on the NSE shows that the fund bought about 25 lakh shares of Mamaearth in December, even as the skincare company’s early stage venture capital investor, Fireside Ventures, booked an exit. When Mamaearth went public last year, two sovereign wealth funds had participated in its anchor book — the Norwegian investor and Abu Dhabi Investment Authority (ADIA).
ADIA also bought significant holdings in Zomato, Policybazaar and Paytm in the last few quarters, although it could not be ascertained if it is still invested in those companies.
Singapore has also shown interest in Indian new-age stocks, with three of its sovereign wealth funds taking positions in such companies.
Two of those funds — GIC and Temasek — have built a holding of 33.7 crore shares in Zomato which amounts to a 3.8 percent stake in the company. Meanwhile, a step-down subsidiary of the Minister for Finance, Government of Singapore holds a 3 percent stake in the gaming company Nazara and a 1.7 percent stake in Delhivery.
Twist in the new-age tale
Things are changing for the listed new age firms. As their economies of scale kick in and spends on advertising, discounts and other discretionary expenses reduce, the companies are seeing their profitability improve.
Three of the batch – Zomato, Policybazaar and Delhivery — recorded at least one quarter of net profit in FY24.
Mamaearth not only returned to the black after a loss-making FY23, but also saw its net profit cross the Rs 100 crore mark for the first time in FY24. Meanwhile, Nykaa doubled its net profit to Rs 40 crore in the financial year.
Industry watchers are of the view that the emergence of profitability might have helped the sovereign wealth funds build a thesis on these stocks.
"The new age companies had been struggling with losses. Now, there is a blend of growth and profitability because of which interest in them is coming back. A double digit growth which is sustainable in nature and can result in stable profits is good news for these stocks," said Karan Taurani, a senior equity analyst at Elara Capital.
Ambareesh Baliga, an equities expert who advises family offices, said that investments by sovereign wealth funds typically are long term bets that play out over 4-5 years.
“These companies, except possibly Paytm, have shown consistently improving numbers which proves that going ahead the bottom line should be robust. For Paytm, they are probably betting on the fact that the worst is behind and with bank tie ups and more focus on governance, we could see Paytm getting back on track,” he added.
While Paytm plunged to new lows after the Reserve Bank of India effectively spiked its associate payments bank earlier this year, the stock may find its way up if a report of the Adani Group evaluating an investment in the company comes true.
However, the embattled fintech has refuted the development and termed it as ‘speculative’.
Zomato is the biggest beneficiary
Food delivery company Zomato has been able to woo the most number of sovereign wealth funds at a time when its stock price has been on a tear — on the back of increasing profitability and the growth of its quick commerce arm, Blinkit.
At the end of the March quarter, its cap table included Government Pension Fund of Norway (1.14 percent stake), Kuwait Investment Authority (1.26 percent stake) and two Singaporean government-backed funds (3.8 percent stake).
The company's stock is trading at more than 100 times forward earnings, well above multiples for global peers including Uber, Deliveroo, and Meituan.
At 11:30 AM the stock was trading at Rs 184 per share, up 174 percent over the past one year.
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