Amid global weakness in tech stocks, Fed rate hike and liquidity tightening over soaring US inflation, Sanjeev Bikchandani of Info Edge has said it is difficult to predict the growth of startups and tech firms in India beyond one quarter.
"Given the uncertainty of the last two-and-a-half years since COVID-19, we have learnt to go with the flow and not predict too far ahead because there are a lot of unpredictable triggers for the market,'' said Bikchandani, founder and vice-chairman of Info Edge, in an exclusive interview with CNBC-TV18 on June 20.
He also added that several events on the ground - including the Russia-Ukraine war, China supply chain issue, and correction of oil prices could resolve in the next three-to-six months, which may lead to inflation coming off.
Also Read: US consumer price inflation accelerates to 40-year high of 8.6% in May
Impact of US inflation
US inflation rose to 8.6 percent in May - the fastest pace since 1981, which led to the Federal Reserve announcing its biggest interest rate rise in nearly 30 years. The US central bank said it would increase its key interest rate by three quarters of a percentage point to a range of 1.5 percent to 1.75 percent to ramp up its fight to rein in soaring consumer prices.
Nomura Holdings revealed in a note that the US economy will likely fall into a mild recession by the end of 2022 as the Federal Reserve raises rates to tame prices. It has lowered its real GDP forecast for this year to 1.8 percent, compared to 2.5 percent earlier, while the projection for next year is seen declining to one percent, from 1.3 percent growth earlier.
US inflation has brought in worries for new-age companies due to Fed rate hikes, valuation of growth stocks, and liquidity tightening impact. On the US recession outlook, Indian IT companies stare at a void as client spending may go down.
''If the US goes into recession -which it may or may not because things could change on the ground, then we'll have to figure out what would happen to the demand for Indian IT companies -which are a big client segment of ours,'' revealed Bikchandani.
''Right now we are seeing huge strength in the IT segment and hope it continues,'' he said. The ace investor adds that it is somewhat debatable if the US inflation is demand-led or supply chain bottleneck-led. ''If it is supply chain bottleneck-led, and if the pressure comes off in the next few months, the need for Fed to tighten may reduce,'' he reckons.
Back home, since hitting an all-time high of 18,604.45 last year, the Nifty has fallen 18 percent to close at 15,200 level, which is near its 52-week low. The 30-share flagship BSE Sensex is also trading near 13-month low levels. As bears tightened their grip on Dalal Street, indices declined over 5.5 percent last week to log the worst week since May 2020.
Also Read: Layoffs, shutdowns, funding crunch: The Great Indian Startup Party is over
Startup ecosystem in India: What's changing?
Amid external triggers and the challenging environment due to the market downtrend, the startup ecosystem in India is now witnessing several changes. ''Even early-stage fundraising is getting difficult as valuations have become muted. The way startups are being advised to spend their money or conserve cash by investors has also changed,'' said Bikchandani.
In the present scenario, Bikchandani claims that Info Edge is slow and careful in acquiring companies. ''We are not adventurous acquirers. Life begins after the deal and what matters is what we do with the company that we acquire and where it will go in the next two or three years,'' he said.
The ecosystem was driving up the cost of talent but due to the pandemic, startups came under huge pressure-many of which have laid off employees in the last two years.
According to Bikchandani, the pressure on startup continues although it is off the boil. ''Enough startups have begun to let go of people, but those people are getting jobs immediately, which means that the demand is still there. The wage inflation will not be as high as last year,'' he claimed.
Bikchandani's Info Edge operates the online job portal Naukri.com, matrimony website Jeevansathi.com, real estate platform 99Acres.com, workplace discover platform AmbitionBox.com, and an educational website Shiksha.com.
The businessman has also invested in online food aggregator Zomato and online insurance distributor PolicyBazaar - both former unicorns. At 15.23 percent and 13.3 percent, Info Edge holds minority stakes in Zomato and Policy Bazaar respectively.
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