fintech stocks: Rs 2 lakh crore wealth wiped off! How fintech cos turned riches to rags in 2022

Domestic equities are certainly ending the year 2022 with a smile as they have managed to brush off the global nuisances and be an oasis in the desert.

But a section of the market that has been left sagging are investors in new-age and financial technology companies.

Over the last one year, the sharp correction in stocks like

, , FSN E-Commerce, , and Delhivery have made investors poorer by Rs 2 lakh crore.

Year-to-date, shares of these companies have fallen by 39-60%.

The initial public offerings of these new-age companies saw huge investor frenzy even though many of them were expensive from the valuation viewpoint.

The challenges to earnings growth and profitability and the major sell-off in technology stocks globally made this pack vulnerable to a selling. The rising macroeconomic growth concerns in the backdrop of high inflation and steeper rate hikes saw investors exiting high valuation stocks.

“Investors in public markets are more mindful of cash flows and return ratios. Some of the new-age technologies have tweaked their business models to try and be profitable ahead of their earlier guidance. So, those who can balance this growth and profitability equation would attract investors,” said Krishna Sanghvi, chief investment officer – equity at Mahindra Manulife Mutual Fund.

Given the lack of clarity on growth and return ratios, many money managers are apprehensive to enter this space.

“We are comfortable owning businesses where we could see a reasonable path to profitability and make sense from a capital efficiency standpoint. This has led us to avoid investment in some of the new age companies,” said Vinit Sambre, head of equities at DSP Mutual Fund.

While the analyst community remains largely sceptical about the performance of the stocks in 2023, not all are bearish on the long-term prospects of the companies.

“This bear market is excellent for consumer technology companies as the competition intensity will reduce since there isn’t any free money. It is a winner take all game and I am confident of multiple big winners here in this decade,” said Amit Jeswani, founder and CIO of Stallion Asset.

Jeswani believes that the worst of it, both in terms of stock price correction and earnings challenges, is behind for fintech and consumer tech firms.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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