Technology is the enabler that makes economies of scale easy. Seven of the 10 largest companies in the world, by market capitalisation, are technology companies. The largest company, Apple, is now worth over INR177.7 lakh crores.
In 2020, when Apple’s market cap amounted to INR157.7 lakh crore, it was two-thirds of India’s annual GDP of INR222 lakh crore. In terms of size, the market cap of the top 10 technology organisations is the equivalent of 4.5x of India’s annual GDP.
With the buzz around technology, and its ability to catapult companies to the stratosphere, it is no surprise that Indian startups too, are leveraging this route. From the meagre 48 percent digital buyer penetration rate in 2016, to a massive 70 percent in 2020, India’s surging tech user uptake has provided a shot in the arm for tech start-ups. Home grown tech giants, and ones that are now household names, include Flipkart, Ola and Zomato.
Bangalore headquartered Flipkart grew 15 times in 2019; its revenue in 2014 was ‘only’ INR2800 crore. Walmart acquired Flipkart in 2018 in an INR1.2 lakh crore deal.
According to a recent media briefing, Flipkart led the US retail giant’s Q4 FY 20-21 net sales internationally. Walmart has not set a date for Flipkart’s IPO. However, the idea is on the cards.
Ride hailing platform, Ola, was hit hard by the pandemic, as travel came to a stand still. One of its investors, Vanguard Group, discounted its value by 50 percent last June — from INR44,430 crore to INR22,215 crore. OLA has successfully closed INR3,702 crore in July 2021 at 25-30 percent discounted valuation to last year’s valuation. Ola’s IPO is in the offing.
Zomato’s IPO is a 2021 highlight
Zomato’s CEO, Deepinder Goyal, mailed his employees in September 2020, about his desire to list the company on the Indian Stock Exchange by mid-2021.
At the time, it was considered an ambitious announcement. At an issue size of INR9,635 crores, Zomato’s IPO was oversubscribed 38 times and July 2021 witnessed the listing at a 50 percent premium over its issue price. From there, the script has touched a high of double the issue price of INR76. The IPO proceeds will fund both organic and inorganic growth initiatives.
It even surprised market pundits when a company with no history of profitability, and with losses amounting to an estimated INR8, 164 crore in the year ended March 2021, listed on the bourses.
Zomato boasts a presence in 23 countries, 526 cities, and had 3.5+ lakh active restaurant listings as of December 2020. It marked the start of a phase in the market when future prospects alone decide investors’ appetite for a stock. Besides, it gave a huge boost to the tech startup community’s confidence.
The pandemic has made technology a necessity; it is no longer a luxury. It has catapulted organisations that are capable of working from anywhere, or from the cloud as they say.
Young investors, who have experienced the services or products of industry disruptors, are riding the wave. In addition, Zomato’s IPO has paved the way for the likes of Policy Bazaar, Delhivery, Nykaa, Paytm and Ola. And only last week, a Chennai based startup–called Freshworks–filed a billion dollar IPO in the US stock market.
Make hay while the sun shines. And keep a lookout for the next big opportunity. Only today, India’s burgeoning edutech space has yet another unicorn start-up. Bangalore-based Vendantu is now the fifth edutech unicorn in the country.
Each transition–from a hunter-gatherer economy to an agrarian one, and from manufacturing to the current fourth industrial revolution–shines the spotlight on change. Every few decades, the old order makes way for the new. Change truly is the only constant.