Despite risks, digital platforms continue to offer opportunities, says Alchemy Capital’s Hiren Ved

The rise of digital platforms: Growth and opportunities ahead

The rise of digital platforms across various sectors, including financial services and consumer goods, presents both opportunities and disruptions, says Hiren Ved, Director and CIO at Alchemy Capital. Despite the risks, these platforms will continue to offer opportunities for investors willing to navigate the competitive dynamics, he says.

“While some may question the profitability of these companies, the increasing market capitalisation of these platforms suggests they will play a significant role in the future. The Nifty, for example, is evolving, with new companies entering and older ones exiting, reflecting the changing landscape. Over the next few years, we will see the continued growth of digital platform companies, although the timing and pricing of these investments will be critical,” said

Ved while speaking exclusively to Moneycontrol about his five big ideas for investing in 2025, highlights the fact that segments like UPI and the payment systems have seen the emergence of first-generation entrepreneurs who are leveraging the digital infrastructure built in India.

Digital platforms are now enabling smaller, nimble, organised players to thrive and erode the margins of large consumer categories.

Platforms like ONDC, which are designed to offer more open and neutral infrastructure for businesses, might challenge the profitability of private platforms in the future. This could alter the dynamics in industries, where marketplaces traditionally functioned for profit but may now have a more public-oriented structure.

The platforms not only promote traditional brands but also offer opportunities for newer ones to reach consumers. “For traditional FMCG companies, the rise of digital platforms presents both a challenge and an opportunity. They may respond by acquiring successful D2C brands, as seen with companies like HUL,” says Ved.

He highlights the model that Jio followed in telecom -- attract customers with low prices and then gradually monetise as the market consolidates. Zerodha’s disruption of the broking sector is also prime example of how a digital platform can dramatically shift industry norms. The next challenge is how these platforms can monetise this customer base by delivering more services. Zomato, as Ved instanced, started with food delivery and expanded into quick commerce, adding layers of services.

The development of digital public infrastructure, such as ONDC, presents a potential challenge to private platforms like Zomato. Ved believes that ONDC, which is not built for profit, may alter the dynamics for platforms by reducing the incentive for suppliers to stay on private platforms due to lower transaction fees.

Much like the competition between private and public sector banks, the market can support multiple players. Platforms will need to continuously innovate to deliver value to both sellers and consumers. This evolution, as per him, leads to intense competition – bolstering more innovation. The market will naturally weed out the weaker players. This is, indeed, the way of the market.

A related example as cited by Ved, is Bajaj's adjustment of its market share expectations in the payment business. It reflects the challenges in competing with established platforms that have already captured a significant user base. Even after having the brand and capital, Bajaj realised that consumers were unwilling to leave existing platforms.

Despite the competitive dynamics and occasional price wars in industries, “the digital platform space will go through phases of consolidation.” And this will create an opportunity for investors to enter these sectors as prices move towards correction. Although new entrants may find it difficult to get capital amid a changed funding environment. Thus, leading to consolidation, says Ved.