Nikhil Kamath is still not looking to buy new-age internet companies such as Nykaa, Paytm, Zomato and others despite their strong correction so far this year. “I don’t like companies which do not make a profit, because I like valuing companies as a multiple of profit,” the co-founder of True Beacon and Zerodha told .com. He added that it may not be right for anyone to factor in future growth before the growth has happened and value the company as if that were a certainty. So far this year, Nykaa is down 19.6%, Paytm stock has tanked 54% and that of Zomato has fallen 44%.
“The ecosystem constantly changes, there are new competitors and none of these companies have a really big moat. So I would remain sceptical even at the current valuations,” Nikhil Kamath added. He, however, does believe that at some point the new-age internet firm will become attractive enough for investors to dive in but cautions that might not be today.
Nykaa IPO came in at a price band of Rs 1085-1125 per share in October last year, the stock hit a high of Rs 2,573 within weeks of listing. Since then, Nykaa’s share price has fallen to now trade at Rs 1,675 apiece. Zomato launched its IPO at Rs 72-76 per share in July 2021. The stock soared to hit a high of Rs 169 per share and now trades at Rs 78 per share. One 97 Communications, the parent of Paytm launched its IPO in November 2021 at a price band of Rs 2080-2150 per share. The stock opened at a discount and has never traded at its IPO price. Today Paytm share opened for trade at Rs 610 per share.
Nikhil Kamath, while not being keen on internet stocks that are yet to turn profitable, is rather interested in a much-diversified portfolio at this juncture keeping in mind the various headwinds. Inflation, rate hikes, soaring commodity prices, and geopolitical worries are some of the risks that he sees for equity markets right now. “A combination of inflation, slowing growth rates, corporate margins coming down, and geopolitical issues added together are the biggest risks,” he said.
To counter the headwinds that are expected, Nikhil Kamath suggested a diversified portfolio with gold, equity, fixed income, real estate, and corporate debt. “If you are solo investing your money in equity that might be a tad bit expensive to have that portfolio. I would recommend increased diversification,” he added. Nikhil Kamath added that he has gone defensive with his own portfolio increasing gold allocation.
“I like the entertainment and travel space off-late because I think the opening trade is going to last in India for a couple of years,” Nikhil Kamath said. While adding that he is not keen on adding banks at this stage considering how much they have soared.