Fund houses prune Nykaa, Policybazaar exposure on profit taking; up Paytm

It's profit-taking, say fund managers; increase holding in Paytm in December

Mutual fund (MF) houses pared their holdings in new-age technology firms PB Fintech (PolicyBazaar) and FSN E-Commerce Ventures (Nykaa) in December. Fund managers said this was on account of profit-taking following a sharp increase in the stock prices of these firms over their initial public offering (IPO) price.

The data from ICICI Direct Research shows MFs held 11.7 million shares of PolicyBazaar in November, which reduced to 10 million in December. While in case of Nykaa, the MF holdings in December stood at 11.3 million, down from 12.3 million in the preceding month.

The market value (total holdings) for MFs of PolicyBazaar as of December stood at Rs 946 crore, down from Rs 1,421 crore in November. While the value of Nykaa was Rs 3,003 crore in November, which reduced to Rs 2,385 crore in December.

“Both these stocks had seen run-up post listing. The stock price of Nykaa rallied strongly and it was better to book partial profits. Though overall equity funds have very low exposure in all the new-age technology companies, we don’t see any significant impact due to the shuffling,” said a fund manager on the condition of anonymity.

MF pruning their exposure could have weighed on the stock price of these companies.

In the last two months, Nykaa and PolicyBazaar have delivered negative returns of 2.5 per cent and 29.4 per cent respectively. Shares of Nykaa are up nearly 84 per cent over its IPO price. The stock ended the day on Monday at Rs 2,071.40 on BSE.

Kotak Institutional Equities in its report on Nykaa last week stated that, “Nykaa’s leadership position in the fast-growing BPC and fashion segments will drive a healthy revenue CAGR (compound annual growth rate) of 33 per cent over FY21-30. Positive unit economics and operating leverage will drive superior margins over time (15 per cent company-level Ebit margin by FY30). Nykaa’s model focusing on content-based customer acquisition, curation and convenience is scalable with long-term growth potential.”

On the other hand, fund houses have remained positive on One 97 Communications (Paytm) and they increased their stake in December. The data shows that MFs held 6.9 million shares in December, compared with 5.8 million shares in November.

Paytm shares have declined since listing, falling 16.4 per cent in the past month. It is

currently trading at nearly half its IPO price.

Since the poor listing of the stock, retail investors have chosen to exit, leading to a significant price correction. “However, we believe that it’s difficult to value these new-age companies in a shorter duration so we would like to hold the stocks for at least two-three years,” said another fund manager on condition of anonymity.

In the recent reclassification exercise conducted by the Association of Mutual funds in India (Amfi), stocks such as Zomato, PolicyBazaar, Paytm, and Nykaa entered the large-cap category.