Would you be okay with taking disproportionate bets or bets which are larger than usual in the consumer tech space that is now getting created in India? It has started with and soon three-four more big consumer tech companies will go public.
So we have been looking at this space very closely and invested in the likes of Meituan in China. I have tracked this space for the last three-four years. Clearly these valuations are much more expensive. The stocks are going to be very volatile over the next one or two years as the managements establish their credibility on execution, etc. But these are high growth spaces. There is a part of the portfolio which could be devoted to this and that is where some of the existing consumer discretionary or staples names would suffer because they would act as the funding source for the emerging tech consumer space basically.
Five years out, do you think a basket of and Hindustan Lever will make money or could a basket of Zomato, Nykaa and Policybazaar make more money because they both are a play on consumers?
Looking at the market caps and execution of some of these emerging tech companies, I would bet my money on them. If I take a five-year period and look at their skill sets and how quickly they move and the innovations they do, I would put a bit more money on these emerging companies over the established players. The established players would do well. They would compound at a slower pace of 12-13%. Some of their multiple deratings would happen. These emerging consumption tech companies would compound much faster and a lot more wealth will be created in the new basket.
From an FII perspective, how large is the interest in new age internet plays because it is not just Zomato but there are many more in the offing–Nykaa, Paytm and Policybazaar are next?
There is a fair bit of interest. Across EMs, there are just a handful of names ex China where FIIs can invest in and with this regulatory oversight which is happening, I do not think China will see incremental allocations over the next six months. So that leaves ASEAN and India. In ASEAN, there are just one or two listed names or platforms. India is where there is a lot of focus from an FII perspective. Over the last two years of Covid, these companies have gained significant critical mass. Their revenues are up nearly three to four times over the last three years. These are good managements and adoption is high, the headroom for growth is high and so they are speaking the right language. If it is followed by execution, then they can generate significant wealth for investors.
