The internet is about to shake up the Indian stock market.
A number of Indian internet companies are likely to enter the market this year or next. Zomato, the country’s response to DoorDash, filed for a $ 1.1 billion collection. Walmart-owned e-commerce leader Flipkart, fintech giant Paytm and online learning platform Byju’s are also in various stages of initial public offerings, according to local media reports.
This could change the Indian market, which has very few Internet companies. While large tech companies are among the largest listed companies in China and the United States, the Indian market is currently dominated by energy, finance and IT outsourcers. Reliance Industries – India’s largest listed company controlled by the country’s richest man – is ditching oil and gas and last year received investments from Facebook and Google for its technology arm, Jio Platforms.
Some private technology companies may be among the largest companies in India. Flipkart raised $ 1.2 billion last year from a group of investors led by Walmart, at a $ 25 billion valuation. Parent company Paytm was valued at $ 16 billion in 2019 when it raised money from investors including Softbank and Ant Group.
Although the pandemic has hit India hard, its stock market has surged. The MSCI India Index hit record highs this week and is up 14% year-to-date. A vibrant marketplace will help these unicorns get the value they are looking for in an IPO.
The pandemic has helped online platforms attract new customers in India as elsewhere. According to Bernstein, Indian Internet companies have managed to cut their annual customer acquisition costs by 20-30%. This sets the stage for better financial performance ahead of their IPO.
Investors who have invested in Indian tech companies in the past few years will be able to cash out. Excluding infrastructure and real estate, venture and private equity funds invested $ 93 billion in India from 2018 to 2020, according to a March report from Ernst & Young. Technology and e-commerce were some of the most popular sectors. That’s not including over $ 10 billion invested in Reliance’s online platforms.
With 1.35 billion people and the internet industry in its infancy, investors can hope that India will be the next China. According to Bernstein, e-commerce penetration was only 3.6% in 2018.
There are many problems in India too. Poor infrastructure can hold back e-commerce growth. The sometimes opaque business environment in the country has long been a problem for overseas companies and investors, and the recent rise in nationalism and protectionism around the world may exacerbate this problem. Bad debts were weighing on the country’s financial system even before the pandemic, which could slow the country’s growth.
More trendy companies on the Indian stock market will excite investors, but they should still prepare for the bumps on the road.
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