Nikhil Kamath on how high cost of borrowing in US is likely to impact startups in India

Nikhil Kamath

Nikhil Kamath, the co-founder of Zerodha and alternative asset management firm TrueBeacon, says that inflation is here to stay and the increasing cost of borrowing in the US is likely to decrease the flow of money into India's startup ecosystem.

Nikhil Kamath also shares his views on startup funding and reworking asset allocation strategies at True Beacon. Excerpts from the discussion:

How are you restrategising asset allocation for True Beacon?

I'm a fairly bearish character. More often than not you would find me looking at the glass half empty. We are about 50 percent hedged. We don't take any exposure in mid-caps or small caps.

We are in the Nifty 50 alone. In the top 50 companies, we have a slightly higher allocation to banking, but we're perpetually hedged.

What is your view on the startup valuations now?

The private market is more levered and more expensive than the public market. If there were to be an arbitrage, where I could buy public and sell private, I would probably do that.

The pain in the startup ecosystem by virtue of the cost of capital going up will remain for a significant amount of time.

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Inflation is not going down anytime soon across the world. Consequently, interest rates and the cost of capital are not going to go down either.

When it becomes expensive for foreign players to borrow money to invest in India, the amount of money available to startups will be lesser than what we saw in the last one or two years.

It would be tough for startups in the immediate future. A lot of layoffs are happening around me in Bangalore. The way in which many startups work, the cost of capital all of this is being recalibrated.