Dear Reader,
The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of.
NR Narayana Murthy, the principal founder of Infosys, dubbed new-age investors' practice of boosting a company’s valuations by focusing on revenue growth alone as a Ponzi scheme. As a start-up grows, it does a series of fund-raising activities. Funds are raised at ever-higher valuations despite continuing losses and cash burn at the company. While this exercise enriches early investors, the last one to enter the company is “left holding the tin box”, said Murthy at an industry event. Perhaps he meant a tin cup.
He is spot-on in his observations. It is often the retail and small investors who enter the company in the last leg of the fund-raising, and they face the consequences. This is aptly demonstrated in the initial public offerings (IPOs) of One97 Communications (Paytm), Delhivery, Zomato, PB Fintech, FSN E-Commerce Ventures. The IPOs were sold at premium valuations.
As euphoria about start-ups and new-age companies ebbed, the shares of all these companies dropped below their IPO prices. Most of these companies are yet to turn profitable or generate money on a sustainable basis.
Thankfully, public markets instil accountability and discipline. Rising public scrutiny, higher interest rates and reduced fund flows into start-ups have forced a rethink at the above-mentioned companies. Several companies aim to break even at the operating level in the next one year and have achieved reasonable progress—Zomato, PB Fintech, One97 Communications, to name some.
Yet the companies have much to deliver as we explained in these stories on Zomato, PB Fintech, One97 Communications, Delhivery and FSN E-Commerce Ventures. “What the market likes and rewards is profitability. It has reacted positively, at least in the short term, to Paytm’s (Q3 FY23) numbers. If the company can continue to post strong numbers, money will chase the stock,” Shishir Asthana wrote on One97 Communications. Moreover, slowing growth and competition from deep-pocketed investors pose a different set of challenges for these companies.
While the coming fiscal year numbers from these companies will be closely tracked, observations from successful entrepreneurs such as Murthy bring much needed attention on the valuation of start-ups.
Investing insights from our research team
Weekly Tactical Pick: This infra player stands tall, post correction
Be selective in agrochemical sector as monsoon remains the joker in the pack
Info Edge: IT hiring slowdown points to challenges ahead, valuation a sticking point
What else are we reading?
Are retail investors losing faith?
Will G20 pay heed to Narendra Modi’s wake-up call?
China’s growth optimism key to industrial metals’ outlook in 2023
India at last gets going on drug regulatory reforms
Investors want SBI Card to make the most of growing credit card spends
Meet GCCs that are deepening India's tech industry
Personal Finance: Tackling unprecedented situations in financial planning
Money mistakes even wealthy people make (republished from the FT)
Deluge of inflation data pushes US borrowing costs to 2007 levels (republished from the FT)
Delhi G20 Foreign Ministers’ Meeting: Maximalist positions of West and
Russia drown out India’s constructive agenda
Mumbai needs an ecological plan for pollution control
Uncle Sam is disrupting the venture capital world
Technical Picks: Bharat Forge, GoldBees, Copper, Axis Bank and Asian Paints (These are published every trading day before markets open and can be read on the app).
R Sree RamMoneycontrol Pro
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
