Should I stay invested in Strides Pharma, Dhani, and Paytm or Exit them. What is your view?

Lets us look at the performance of the three stocks mentioned

• Strides Pharma
• Dhani
• Paytm

All three companies have lost more than 60% in value and have been wealth destroyers for their shareholders.

Let us look into some reasons for the slump considering that the stock market since June 2020 has done a handsome recovery despite three waves of Covid-19 and its linked impact

• Strides Pharma

Incorporated in 1990, Strides Pharma Science has two business verticals, viz., Regulated Markets and Emerging Markets. In line with this, it has eight manufacturing facilities with five US FDA-approved facilities and two facilities for the rest of the world markets.

Strides Pharma has had a difficult last year along with other pharma companies owing to

1. Lower sale of products and decrease in margins due to pricing pressure from the US Market
2. Restructuring of business with an exit from Canada and some parts of Europe
3. Low to no-sale of Covid-19 vaccine “Sputnik Light” leading to an inventory of 2.5 crore units of the single-dose vaccine. This is despite the Rs 700 crore vaccine manufacturing facility by the company

With all this, the company reported a 36.6% decline in consolidated net profit to Rs 29.22 crore on a 4.7% fall in net revenue from operations to Rs 866.02 crore in Q4 FY22 over Q4 FY21.

This is a bit bothersome as the company has a debt of about INR 1000 Crores and a low-interest coverage ratio. Despite this, the company has plans to reduce its debt significantly in the coming years and has a roadmap for the same

Observation:

1. Pharma like Steel, Cement industry is a capital intensive sector. Moving to any other manufacturer within the sector will also come with risks
2. Pharma is vulnerable to new rules and restrictions by USFDA, UKMHRA, etc. Owing to this, some level of uncertainty will stay
3. Considering the state of the company, you can move to companies like Ajanta Pharma, Torrent Pharma, Biocon, Sun Pharma

Please note, that this is not a recommendation but an answer to the query. Kindly do your research prior to investing in any asset class.

• Dhani

Dhani changed its name from ‘Indiabulls Ventures‘ to ‘Dhani Services’ with effect from October 6, 2020, to align its business of providing technology-enabled subscription-based healthcare and transaction finance services, through its Dhani App. Its online marketplace competes with the likes of Flipkart, Amazon, 1mg, Netmeds, Pharmeasy, etc. to provide different day-to-day items at a discount.

Its subsidiaries are in different business activities including Asset Reconstruction, Stock Broking, etc.

The shareholding pattern for the company is interesting and can be gauged as one of the reasons behind the tanking of the stock, especially in 2022

Foreign Institutional Investors(FIIs) and Foreign Portfolio Investors(FPIs) reduced their stake in the company to below 22%. This was despite a good show in the December 2021 Quarter.

Observation:

1. In all this selling, Domestic Institutional Investors and the Company promoters have raised stakes in the company
2. With the diversity of business, predictability of profits and growth are hard to come by
3. The Dhani Loan portfolio also had issues linked to defaults and complaints from customers which are yet to be resolved
4. Some brokerages are still bullish on the stock and have predicted capital appreciation from current levels to above INR 100–120
5. Considering all the points, a retail investor can possibly
   1. Try to average at current levels if they have an appetite for volatility and patience for price appreciation or
   2. Move to established Fintech Players like Bajaj Finserv or Cholamandalam Investment and Finance

Please note, that this is not a recommendation but an answer to the query. Kindly do your research prior to investing in any asset class.

• Paytm

Paytm has been the poster boy of Online Payment and was popularized after demonetization in 2016. The company got a huge boost owing to the lowering of Internet(4G) access charges on mobile devices due to Telecom War Between Reliance Jio – Bharti Airtel – Vodafone Idea.

After its initial operation as a wallet service for payment, it has ventured into different areas like now defunct Paytm Mall, Insurance, Digital Gold, Ticket Book, Bill Payment, etc. The competition it faces from the likes of Phonepe and Google’s Gpay is enormous as they have based their service entirely on NPCI’s UPI Service.

Recently, Paytm has also made its foray into Buy-Now-Pay Later(BNPL), Co-Branded Credit Cards, Personal Loan, Mutual Fund Investments, etc.

Observation:

1. The company has been seeing exits at the top level to other industries thereby bringing into question the direction of the company
2. Despite growth in the user base and revenue, the company is still burning cash and in some places using incentives to retain customers
3. Some investment houses, value investors, and brokerages are bullish on the stock and have predicted capital appreciation from current levels to above INR 1000–1200
4. The issue of Chinese Investors and lack of IT audit has had the company, especially Paytm Payments Bank(PPB) in the crosshairs of the Reserve Bank of India (RBI). The Banking Regulator had prohibited Paytm from onboarding new customers to the PPB
5. Considering all the points, a retail investor can possibly
   1. If you are an investor since IPO or have entered at levels higher than what the stock is quoting currently, you can average and hold the stock for a period of 12–18 months with the hope of recovery as the financial sector in India has been on an upswing as compared pre-2020 window
   2. The rise in interest rates can hurt Paytm especially linked to lending and associated services
   3. If the stock is showing disappointment in the coming quarter, then consider moving to established banks like HDFC, Axis, ICICI, or to NBFCs that are focused on the retail space

Please note, that this is not a recommendation but an answer to the query. Kindly do your research prior to investing in any asset class.

Hope this helps

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Happy Investing!!

References:

1. Strides Pharma Science Q4 PAT falls 37% YoY to Rs 29 cr
2. Unable to sell Sputnik Light stock, Stelis Biopharma requests PM Modi for procurement of jabs
3. Strides Pharma bags USFDA approval for Ibuprofen Oral Suspension; stock marginally up
4. Does Strides Pharma Science (NSE: STAR) Have A Healthy Balance Sheet?
5. Dhani Services hits 10% lower circuit on FPI selling; down 42% in 3 days
6. Indiabulls’ e-commerce platform Yaari set to merge with Dhani Services; lays off 150 employees
7. Latest Shareholding Pattern – Dhani Services Ltd.
8. Google Pay, Paytm, PhonePe user? These tips will stop you from losing money
9. JPMorgan Sees 60% Upside In Paytm’s Beaten-Down Stock. Here’s Why…
10. Paytm Payments Bank hopes RBI to lift curbs on taking new customers soon