6 January, 2024 by Alexander Zahari
India's Growth Wave: Riding the Startup Perspective
This story is our take on the article “India is in the midst of an unusual IPO boom” by The Economist, and how startups can ride this wave
In the dynamic landscape of Indian investments, a peculiar trend has emerged, reshaping the perception of lucrative opportunities within the country. While established conglomerates and tech giants have traditionally been the focal points for investors, an unconventional wave of success stories, such as that of Cello World, signals a paradigm shift in India’s investment terrain.
Cello World, a 61-year-old company specializing in humble “tiffin” boxes, inexpensive pens, and molded furniture, defied expectations with its recent IPO, soaring by 29% on the first day of trading and attaining a market value surpassing $2 billion. The unassuming nature of its business might not be the usual allure for venture capitalists or foreign portfolio managers, yet its success speaks volumes about a hidden gem within the Indian economy.
The allure of companies like Cello World lies in their capacity to harness India’s growth story without attempting to dominate it. In a market where valuations for loss-making startups experienced a downturn, businesses focusing on ordinary aspects of the economy, like Mankind Pharma, a manufacturer of contraceptives and pregnancy tests, have seized the spotlight. Mankind Pharma’s steady revenue growth and healthy profits showcased the untapped potential in seemingly mundane sectors, sparking a domino effect of similar IPO success stories.
As of early November, 194 companies have gone public in 2023, surpassing the total for the entire previous year. This IPO surge extends beyond consumer-goods companies, including those in construction, steel, and electrical components – industries not typically associated with rapid growth. Many of these firms are capitalizing on the Indian government’s efforts to strengthen domestic manufacturing and enhance infrastructure, positioning themselves as beneficiaries of these strategic initiatives.
Riding the Tech Wave
Amidst this transformation, tech startups find a unique position to ride the wave, leveraging the ongoing momentum without having to create it. The downturn in valuations for loss-making startups last year presented a valuable lesson – instead of reinventing the wheel, successful startups are aligning themselves with India’s existing growth narrative.
As the market showcases the success of companies like Cello World and Mankind Pharma, tech startups can draw inspiration from their ability to capitalize on India’s economic growth without chasing risky and unproven business models. The boom in public offerings extends beyond traditional sectors, offering a myriad of opportunities for tech startups to showcase their innovations and tap into the broader market enthusiasm.
The momentum shows no signs of waning, with an increasing number of companies receiving approvals for public offerings. From sledgehammer producers to car parts manufacturers, a diverse array of businesses is stepping into the limelight, eager to go public before India’s general elections in May. The bullish sentiment is supported by analysts like Nipun Goel of IIFL Securities, who anticipates a robust pipeline of IPOs for the next 12 to 24 months, potentially extending the boom for five to seven years.
In this evolving landscape, India emerges not just as a land of traditional investment giants but as a fertile ground for startups and ventures across diverse industries. The key lies in recognizing the untapped potential in seemingly ordinary businesses and riding the wave of India’s economic growth. As the IPO boom continues, entrepreneurs and investors alike are presented with an unparalleled opportunity to participate in and contribute to India’s extraordinary journey of growth and innovation.