Recent regulatory actions have sent shockwaves through several sectors of the Indian stock market, particularly impacting companies in the gaming, fintech, and brokerage industries. Firms like Delta Corp, Nazara Technologies, Angel One, and Paytm have seen their stock prices plummet dramatically in response to new rules and enforcement measures.
These regulatory interventions, aimed at protecting consumers and ensuring market integrity, have raised questions about the future profitability and business models of affected companies. Investors are now grappling with the challenge of assessing the long-term implications of these regulatory changes and their potential impact on company valuations. In this article we will examine the recent regulatory landscape and its effects on key players in these sectors.
List Of Stocks which were hit by Market Regulators
Nazara Technologies
Nazara Technologies has been significantly impacted by the implementation of a 28% GST on online gaming. The company’s stock had been severely affected this year as the shares of the company fell from a recent high of ₹ 900+ to ₹ 600, raising concerns about the viability of its gaming segments. Investors were particularly worried that the high tax rate, applied to the full face value of bets, will discourage casual gamers, potentially leading to reduced user engagement and revenue.
Since the announcement, Nazara’s stock had experienced considerable volatility and faced downward pressure in the market. However in the last 1 year the share price of the company has shown a promising recovery, with the stock price rising from a low of ₹ 535 to ₹ 874. This shows that despite the challenges the industry has faced , Nazara has shown resilience: Revenue grew from ₹1,091 crore (FY2023) to ₹1,138 crore (FY2024), while their profits rose from 61Cr. in March, 2023 to 75 Cr. in March, 2024 . This comes at the backdrop of the company’s plan to diversify revenue and optimize its costs.
Note: If you want to learn Candlesticks and Chart Trading from Scratch, here’s the best book available on Amazon! Get the book now!
Outlook: Nazara’s ability to grow revenue amid regulatory headwinds demonstrates adaptability. However, the company must navigate the high tax burden while maintaining competitive pricing. Future success depends on innovation, cost management, and capitalizing on growth opportunities in the evolving gaming landscape. The long-term prospects of India’s online gaming industry remain uncertain under the current tax regime.
Delta Corporation
Delta Corp was hit hard by the 28% GST implementation on online gaming. Its stock plummeted from ₹333+ (1st April, 2022) to around ₹110 on 28th March, 2024, alarming investors about the future of its gaming segments. The high tax rate on bet values threatened to drive away casual gamers, potentially slashing user engagement and revenue. Delta Corp’s stock underwent wild swings and faced strong selling pressure after the announcement.
Yet, stock looks to take a support at ₹110 and climb up to ₹133. Delta Corp looks to be struggling with its business prospects as compared to Nazara Technologies as the revenue of the company has gone down from ₹1021 crore in FY2023 to ₹925 crore in FY2024. Profits of the company has also taken a mild hit by falling to ₹266 crore in FY2024
to ₹245 crore in FY2024, demonstrating a strong recovery. The company achieved this by diversifying its revenue streams and optimizing operations.
Outlook: Delta Corp proves its adaptability by maintaining revenue growth despite regulatory hurdles. It now faces the challenge of balancing high taxes with competitive pricing. To thrive, Delta Corp must innovate, manage costs efficiently, and seize growth opportunities in both online and offline gaming. While India’s gaming industry faces an uncertain future under current tax laws, Delta Corp’s diverse portfolio and proven resilience may help it navigate the challenges ahead.
AngelOne Broking
Angel One, a leading Indian stockbroker, faced challenges in early 2024 when SEBI introduced new regulations for discount brokers. The stock price dropped from ₹2600 to ₹2025 as the company had to reassess its business model. Despite this setback, Angel One’s revenue improved from 3,002 Cr to 4,272 Cr, and profit increased from 890 Cr to 1,126 Cr year-over-year.
SEBI’s new regulation, effective October 1, 2024, eliminates volume-based discounts for brokers from market infrastructure institutions. This aims to level the playing field by implementing uniform fees regardless of trading volume. The change may impact discount brokers’ profitability and increase costs for traders.
SEBI also addressed the discrepancy between daily investor payments and monthly broker payments to exchanges, which sometimes led to brokers collecting more from clients than they paid to exchanges.
Outlook: Despite the regulatory hurdles, Angel One’s future remains cautiously positive. The company is focusing on technological innovation, expanding its product range, and enhancing customer experience to maintain its market position. While the transition may impact short-term profitability, Angel One’s strong brand, large customer base, and digital-first approach position it well to adapt to the new landscape. The company aims to leverage its tech capabilities to offer value-added services and maintain its competitive edge.
Also read..
Paytm
Paytm, a leading Indian fintech company, faced a significant setback in early 2024 when the Reserve Bank of India (RBI) imposed strict regulations on Paytm Payments Bank. This regulatory action sent shockwaves through the fintech industry and highlighted the delicate balance between innovation and compliance in the rapidly evolving digital finance sector. The restrictions, which included halting new customer onboarding and limiting deposit operations, forced Paytm to quickly adapt its business model and reassure stakeholders.
The RBI imposed severe restrictions on Paytm Payments Bank in January 2024, citing persistent non-compliance. The bank had been ordered to stop accepting new deposits and credits on January 31, 2024. This action significantly impacted Paytm’s business model and caused its stock price to plummet from ₹761 to ₹310 in a matter of 3 months , alarming investors. However, during the FY 2023-2024 the company narrowed its loss from 1,776 Cr to 1,422 Cr. while the sales have also improved to 9,978 Cr from 7990.
Paytm faced the challenge of migrating existing customers to alternative banking partners while maintaining service continuity. The company had to reevaluate its business strategy, focusing more on non-banking financial services and exploring new partnerships. These changes were complex and time-consuming, potentially affecting customer retention and acquisition.
Outlook: Despite regulatory challenges, Paytm’s future outlook remains cautiously optimistic. The company is diversifying its services, strengthening partnerships with other banks, and focusing on enhancing its non-banking financial offerings. While recovery may be gradual, Paytm’s strong brand recognition and large user base position it to potentially rebound and adapt to the evolving regulatory landscape. Additionally, the Paytm founder Vijay Shekhar Sharma came out with positive guidance and set a goal to make the Paytm brand worth $100 billion.
Conclusion
In conclusion, as the Fintech and Gaming industry continues to evolve, companies must strike a balance between innovation and adherence to regulatory frameworks. The incident serves as a cautionary tale, prompting new age companies to reassess their practices and potentially shaping future regulatory approaches in India’s digital finance landscape.
Written By Dipangshu Kundu
By utilizing the stock screener, stock heatmap, portfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks, also get updated with stock market news, and make well-informed investments.
Start Your Stock Market Journey Today!
Want to learn Stock Market trading and Investing? Make sure to check out exclusive Stock Market courses by FinGrad, the learning initiative by Trade Brains. You can enroll in FREE courses and webinars available on FinGrad today and get ahead in your trading career. Join now!!
