Morgan Stanley Says accept the “New Normal” to India investors on Tech Valuations
- ByStartupStory | February 28, 2022
According to Kamal Yadav and Sachin Wagle, co-heads of Morgan Stanley’s India investment banking unit, a global market rout has reset valuations of technology companies in India, and investors must adjust to the new normal.
In India, the Wall Street bank had two record years in terms of mergers and acquisitions and initial public offerings. They included Mukesh Ambani’s non-energy firms’ $27 billion fundraising push in 2020 and Paytm’s $2.5 billion IPO, the country’s largest fintech firm.
However, the bank’s fortunes were not entirely bright. Paytm’s initial public offering (IPO) in November was the worst for any major technology stock since the late 1990s dot-com bubble.
India’s technology companies have fared better than those in most other markets during market downturns.
Since the turn of the century, they’ve gone through at least five rounds of financing crunches. It compelled these Indian entrepreneurs to concentrate on unit economics in order to keep their cash burn under control.
These elements, as well as the country’s favourable demographics and less fragmented nature, all contribute to the expansion of India’s technology sector.
The Indian equity markets are extremely liquid, catering to all types of investors. Today, there is ample and more liquidity to absorb big IPOs such as LIC.
The digitization revolution in India is unstoppable, and the deal pipeline in the technology sector remains robust, albeit with a resetting of valuation and pricing multiples. In 2022, there will be a lot of deals in the real estate, financial institutions, and consumer industries and it is unexpected to be lower than it was in 2021.
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