This is shaping up to be a defining year for Indian technology. Startups like food delivery service Zomato and digital payments star Paytm have grown rapidly thanks to the rapid adoption of smartphones. Lots of foreign capital also helped. As business and financing models evolve, a stack of up-and-coming public offerings highlights new challenges.
The rise of Indian subcontractors such as Tata Consultancy Services (TCS.NS) in the 1990s defined the first golden age. Today, the country is home to around 100 unicorns – unlisted tech companies, mostly young, valued at $ 1 billion or more – according to estimates by Credit Suisse. Among the most prominent is Flipkart, the Walmart-owned online retailer (WMT.N), which is raising funds at a notional valuation of $ 40 billion and is considering listing in New York within the next year.
Those who offer their home-based stocks, including Zomato and the losing online beauty store Nykaa, will help reshape a $ 2.9 trillion stock market. India’s top-valued stocks to date include HDFC Bank (HDBK.NS) and consumer goods company Hindustan Unilever (HLL.NS). According to Refinitiv, only two companies in the benchmark Nifty 50 have negative earnings per share. The new issues will add foam and red ink to the market.
Tail winds are strong, however. Mobile data in India is among the cheapest in the world; credit goes to Mukesh Ambani whose Reliance Industries (RELI.NS) waged a deadly price war. Sending digital money is easy thanks to official efforts to roll out bank accounts and a biometric identity system for everyone. Fintech startups like Paytm, which forecast a $ 3 billion float this year, have capitalized on the country’s pioneering payments system.
New barriers to inbound Chinese investment add another incentive to the list. Jack Ma’s Ant, for example, holds respectively 30% and 17% of the capital of Paytm and Zomato. As tensions between New Delhi and Beijing simmer, these sources of funding seem more difficult to tap and unattractive. For Paytm, the expectation of a release sooner rather than later by its Chinese backers will create significant potential on its stock.
Fortunately, Indian startups are already reaching maturity. Since 2019, India’s leading tech investor SoftBank (9984.T) has wisely deployed its capital, forcing companies to focus on bottom lines. The pandemic has also helped others cut subsidies. Those who enter the public spotlight will all be hot.
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– Indian food delivery company Zomato filed a draft prospectus on April 28 to raise $ 1.1 billion through an initial public offering in Mumbai.
– Fintech startup Paytm aims to raise around $ 3 billion in an IPO later this year, targeting a valuation of up to $ 30 billion, Bloomberg reported on May 27 citing one person close to the file.
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