oppn parties Backing Loss-Making Firms In The Knowledge-Based Economy

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  • The Indian envoy in Bangladesh was summoned by the country's government over the breach in the Bangladesh mission in Agartala
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  • TMC and SP stayed away from the INDIA bloc protest over the Adani issue in the Lok Sabha
  • Delhi HC stops the police from arresting Nadeem Khan over a viral video which the police claimed promoted 'enmity'. Court says 'India's harmony not so fragile'
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  • Asian junior hockey: Defending champions India enter the finals by beating Malaysia 3-1, to play Pakistan for the title
  • Chess World title match: Ding Liren salvages a sraw in the 7th game which he almost lost
  • Experts speculate whether Ding Liren wants the world title match against D Gukesh to go into tie-break after he let off Gukesh easily in the 5th game
  • Tata Memorial Hospital and AIIMS have severely criticized former cricketer and Congress leader Navjot Singh Sidhu for claiming that his wife fought back cancer with home remedies like haldi, garlic and neem. The hospitals warned the public for not going for such unproven remedies and not delaying treatment as it could prove fatal
  • 3 persons died and scores of policemen wer injured when a survey of a mosque in Sambhal near Bareilly in UP turned violent
  • Bangladesh to review power pacts with Indian companies, including those of the Adani group
Devendra Fadnavis to be the next chief minister of Maharashtra after Eknath Shinde agrees to join the government as deputy CM
oppn parties
Backing Loss-Making Firms In The Knowledge-Based Economy

By Ashwini Agarwal
First publised on 2021-11-12 08:33:49

Nykaa's stellar debut on the bourses - the share listed at a huge premium and quickly scaled to double its issue price - made its founder Falguni Nayar a billionaire. But that was not the only thing it achieved. It reinforced the emerging belief that the Indian startup ecosystem is headed for greater heights, backed by investors who are willing to take the long term view and put their money behind entrepreneurs who they think are positive disrupters and will make a difference.

There was a time when investors would not touch a loss-making company (with no break-even in sight, let alone profitability) with a bargepole. But with savvy fund managers willing to pour money in these startups by betting on the future, the retail investors have also changed their stance. This is evident from the way they have backed the recent IPOs of loss-making firms like Zomato, Nykaa, Policybazaar and Paytm, despite their huge valuations and supposedly exorbitant issue price. Most analysts have agreed that such huge valuations for these firms are not sustainable and the share price is likely to go down hugely. But the share price of both Zomato and Nykaa has not gone down after their listing, proving that retail investors were not guided just by the premium in the grey market at the time of the IPO.

India has seen 35 unicorns (firms with a valuation above $1bn) this year. Funds have poured in more than $32bn in startups in India till September this year. This proves that money will never be a constraint for new ideas and innovation. The government now needs to ensure that the regulatory environment is conducive to the nourishing of startup activity. Although a lot has been done to free startups from stifling red tape, the enormous amount of money now being attracted by these firms should not make them targets for tax and other regulatory authorities. This can only be prevented if clear laws and transparent rules are drawn up to help the onward march of these firms that expand India's knowledge-based economy.