Looking to bet on fallen angels? Here’s what you can buy, suggests Digant Haria

“ I think fallen angels is always a difficult space because one does not know which is going to bounce back and one has to track it very closely over the quarters and years. InfoEdge gives a safe bet and their Naukri business has no threat and the other two businesses have an option value for them,” says Digant Haria, Co-founder, GreenEdge Wealth.

Some would say that Nykaa is the best of the lot vis-a-vis cash generation and profitability but markets are painting everything with the same brush – be it Zomato or Paytm or Nykaa or Policy Bazaar. What has changed here?
The thing is that these stocks were expensive when they listed, when they doubled after listing and even probably today because people are pricing in a lot of growth. Point one is there is absolutely no denying that Nykaa disrupted the beauty and fashion market through its online offline model but now I see that a lot of other players are continuously giving some or the other schemes. I was just speaking to my wife about Nykaa yesterday and she said she has not shopped from Nykaa for nine months because there are a lot of other platforms which are giving better deals in all kinds of beauty products.

So that is the truth in life that Nykaa disrupted the offline guys and now somebody else is trying to come and eat away some of the Nykaa pie. That is probably getting reflected in the stock price. Anything that can be built easily, can also be disrupted easily. So Nykaa is definitely going to fight back. It is a great brand but markets never like the space when your dominance is being questioned by someone else. We are exactly in a phase where dominance is being questioned.


We had Bata and Relaxo as dominant players. Now, we see that their dominance is being challenged by a lot of newcomers. The markets typically do not like this phase and Nykaa may be cheap now but still 10 times price to sales or 10 times the revenue multiple. So there is a battle to be fought and it is not an easy answer here that if Nykaa is focussing on profitability, a lot of others are not.

It is not an easy game. People who want to invest in Nykaa have to wait and watch and it has to be a very staggered buying if your strategy goes right.

What do you like, if you have to choose something from the fallen angel category?
From these entire fallen angel categories, there are a few good business models. Nykaa and Policy Bazaar are two genuinely good business models. If one evaluates whether anybody has created a monetising machine in the fashion and beauty space or in the insurance space, these two definitely make the cut, unlike the CarTrades or Paytm or Zomato. Zomato has a good business but I think they have to really compete with Swiggy which has even deeper pockets.

If you ask me these three business models are probably going to be around for many years. One has to wait for the right price for them to come. I do not see that their business models have deteriorated in a very big way. Competition has come and will create some pain for a few years but eventually these guys are doing the right things and they will sustain.

I have one stock which gives an exposure to two of these names directly – InfoEdge. InfoEdge owns a stake in Policy Bazaar and Zomato both and that stock has a base business which is highly cash generating – the Naukri website – where people find jobs. So I think fallen angels is always a difficult space because one does not know which is going to bounce back and one has to track it very closely over the quarters and years. InfoEdge gives a safe bet and their Naukri business has no threat and the other two businesses have an option value for them.