Are internet stocks all set to break the internet?
The launch of Zomato IPO may go down as an important landmark in the history of Indian markets.
There was a time when many Indians thought the Information and Technology sector would do more harm than good to a country like India.
Back in January 1986, when the Sensex was launched, there wasn’t a single banking company amongst the constituents of the index. India’s bellwether index was dominated by metals, manufacturing and consumer goods companies.
Fast forward to 2021, not only does India have some of the finest IT companies and well-run private sector banks of the world but today finance and IT together make up 60% of the Sensex.
You see, the changes in the composition of the Sensex have mirrored the transformation of the Indian economy to a large extent.
In that context, FY22 can prove to be an extremely eventful year for Indian markets which are at the crossroads at present. The IPO lineup for the year foretells how the composition and texture of the leading indices may look like in this decade and beyond.
Will internet companies, insurers and pharmaceutical companies dominate the Sensex (in a way, Indian markets) in the coming decades?
Zomato has already set the tone for all future big bang IPOs, especially for startup companies.
At listing, Zomato’s market cap is expected to be more than Rs 60,000 crore which is greater than the combined market cap of Jubilant Foodworks, Burger King, Speciality Restaurants and Barbeque Nation.
Our research team has recently released a detailed report on Zomato IPO.
ZOMATO is looking to raise INR 9,375 cr (INR 9,000 cr through an IPO and INR 375 cr through OFS). This will improve ZOMATO’s cash levels to INR 15,000 cr, which will serve as currency for M&A (Zomato is looking to acquire a minority stake in Grofers for USD 100 mn), investments in tech & customer acquisitions and general corporate purposes. This cash pile should easily help sustain burn-rates for a good 7-9 years.
Want to apply for the Zomato IPO? Click here
Paytm, which is expected to come up with an IPO of Rs 16,600 crore, is said to be eyeing a valuation of USD 25-30 billion. Such market capitalization would befit that of a Sensex company.
The epitome would be LIC. India’s largest life insurer may secure a spot in the top 5 most valued companies of India, on listing.
These numbers aren’t just mesmerizing but more importantly they suggest that a bigger story might be waiting to unfold in the coming years.
High aspirations, rich demographic dividends and the strong domestic consumption (underpinned by the burgeoning middle class) have been the prominent structural triggers for India’s growth story. Internet revolution, mobile penetration and the emergence of world class startup companies in India will offer tailwinds to these megatrends.
To benefit from market megatrends, here’s what you should do:
- Redo/re-devise your investment strategies
- Don’t get swayed away by listing gains and stay invested in deserving IPOs for the long term
- Don’t buy any index stock blindly thinking that they always make a sound investment
- Conventional valuation parameters are still important but don’t be constrained by them
- Internet companies are challenging incumbents vivaciously and catering to untapped growth areas. Thus, understand the underlying risks thoroughly before investing
- Data is the new oil; always see how intelligently companies are using their data
- Take the mutual fund route if you can’t ascertain which stocks you should buy
True, many unicorns are still loss-making. And maybe a few of them are overrated too. At present, some experts sound more worried about their losses than excited about the opportunities galore they are targeting.
Please don’t forget, great stories often start with disbelief and denial.
You may also like to read: How strong is the foundation of India’s platform economy?
Disclaimer: The blog is for information purposes only and anything mentioned herein shouldn’t be construed as a fundamental reason to buy/hold/sell any stock. Furthermore, the information provided in the blog and observations made therefrom shouldn’t be treated as an extension of recommendations made on the other properties of Ventura Securities. We strongly suggest you to consult your financial advisor before taking any decision pertaining to your finances. Asset allocation becomes extremely relevant.
We, Ventura Securities Ltd, (SEBI Registration Number INH000001634) its Analysts & Associates with regard to blog article hereby solemnly declare & disclose that:
We do not have any financial interest of any nature in the company. We do not individually or collectively hold 1% or more of the securities of the company. We do not have any other material conflict of interest in the company. We do not act as a market maker in securities of the company. We do not have any directorships or other material relationships with the company. We do not have any personal interests in the securities of the company. We do not have any past significant relationships with the company such as Investment Banking or other advisory assignments or intermediary relationships. We are not responsible for the risk associated with the investment/disinvestment decision made on the basis of this blog article.