Flush with unicorns, tech firms see chance of overtaking China
{ COMING OF AGE } MANY OF INDIA’S 625 MILLION INTERNET USERS ARE JUST DIPPING THEIR TOES INTO THE WORLD OF SOCIAL NETWORKING AND E-COMMERCE
MUMBAI: Last week marked a watershed for technology startups in India, as a record bout of fundraising shifted attention to the world’s second-most populous market, just as investors were becoming spooked by a crackdown on internet companies in China.
Food-delivery app Zomato Ltd. became the nation’s first unicorn to make its stock-market debut, raising $1.3 billion with backing from Morgan Stanley, Tiger Global and Fidelity Investments. The parent of digital payments startup Paytm filed a draft prospectus for what could be India’s biggest IPO at $2.2 billion, while retailer Flipkart Online Services Pvt raised $3.6 billion at a $38 billion valuation, a record funding round for an Indian startup.
“Indian entrepreneurs have been quietly building startups for a decade now, the country’s internet infrastructure has vastly improved in that time and there’s a very good appetite for tech stocks globally,” said Hans Tung, the Silicon Valley-based managing partner of GGV Capital, which manages $9.2 billion in assets. “Investors are beginning to see the huge upside and they expect India to be a China.”
Unlike China, where online usage is much more developed, many of India’s 625 million internet users are just dipping their toes into the world of video streaming, social networking and e-commerce. Opportunities in online shopping are particularly attractive, as e-commerce accounts for less than 3% of retail transactions. Tech startups in India are still paying to build supply chain and delivery networks.
India’s population is expected to overtake China’s this decade and the mood now among investors could not be more different in the neighboring nations. China is reining in its tech companies, wiping over $800 billion off market valuations from a February peak and shaving billions off the net worth of its most famous entrepreneurs. This month, the government abruptly pulled ride-hailing service Didi Global Inc. from app stores, months after regulators forced Jack Ma’s Ant Group Co. to halt a blockbuster IPO at the eleventh hour. The clampdown is expected to continue, as regulators curb the power of internet companies and wrest back control of user data.
Indian tech companies “can attract global investors who’ve burnt their hands in Chinese tech companies,” said Nilesh Shah, group president and managing director at Kotak Mahindra Asset Management Co. in Mumbai. The successful listing of a few loss-making startups could lead to re-rating of many existing companies and send the market higher, he said.
India had a record $6.3 billion of funding and deals for technology startups in the second quarter, while funding to Chinabased companies dropped 18% from a peak of $27.7 billion in the fourth quarter of 2020, according to data from research firm CB Insights.
Flipkart is among a slew of startups planning to tap public markets in the next 24 months, with a line-up that includes insurance marketplace Policybazaar’s parent ETechAces Marketing & Consulting Pvt., logistics provider Delhivery Pvt. and ANI Technologies Pvt.’s Ola ridehailing service. The IPOs will give retail investors a chance to own a stake in the startups, which had been available only to global private investors.
In those private markets, India has been minting startups valued at $1 billion or more in recent months at unprecedented speed. In April, half-a-dozen unicorns were born within a span of four days, while intervals between fundraising rounds have contracted to weeks.