India not immune to impact of macro-economic environment: Flipkart CEO

India cannot be isolated from the impact of the current global macro-economic environment, said e-commerce giant Flipkart’s chief executive officer Kalyan Krishnamurthy on Friday. He said the fallout of the situation is likely to be seen next year as well. This impact is related to company valuations and the funding environment.

“Can we be isolated from what’s going on in the global markets? No,” said Krishnamurthy, at Bengaluru Tech Summit during a panel discussion. “Next year, maybe by April-May, some amount of ‘moment of truth’ will come into the market. People will have to go back and raise money. At that time, we’ll have to see what happens to valuations and corrections.”

Macroeconomic factors have plagued public stocks. This would have an impact on private stocks as well with a timing difference.

“What happens to global markets will eventually translate everywhere,” said Krishnamurthy. “Next year is not going to be entirely easy.”

But Krishnamurthy said India, as a package for growth, continues to be very strong from a 20-year view. He said people are getting wealthier and more digitally enabled. The business has democratised and gone into the hinterlands in a very big way. “On it, we are still scratching the surface.”

Another panellist, Nikhil Kamath, co-founder of India’s largest brokerage Zerodha, said valuation is a factor of supply and demand. Sentiment drives what one would pay for a certain asset class and everyone is very optimistic about India. The country is also a very nascent market and the government has been stable in policy making.

“But one has to realise that globally the world is in such a spot where the money supply is going to get tighter,” said Kamath.

He said investments through Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI) have a significant impact on the country.

Another panellist Ashutosh Sharma, India head, investments and M&A at Prosus Ventures, said India provides the opportunity for long-term compounding. And global investors are putting their bets on that. Compounding is the process in which an asset’s earnings, from either capital gains or interest, are reinvested to generate additional earnings over time.

“For example, there are 100 plus companies in India, whose share prices have compounded 20 per cent for the last 10 years. There are 30 such companies in the US,” said Sharma. “That’s what’s driving the excitement around India. In the short and medium term, global markets will play a role in how Indian markets will be valued.”

In terms of valuations in private companies, Sharma said that India still has not witnessed the corrections seen in other parts of the world. He said the primary reason for that is in most situations, companies have either raised enough money or are almost profitable.

“So in private markets, if you don’t need to raise (funding) the valuation doesn’t reset,” said Sharma.

Another panellist, Sujeet Kumar, co-founder of business-to-business e-commerce firm Udaan and who also invests in startups, said that the macroeconomic environment or uncertainty has an impact on seed funding as well. He said the number of seed and Series A investments are low compared to last year.

“There is an impact on seed (funding),” said Kumar. “When the founders are talking to the people in the ecosystem, they are getting the vibe of not getting the capital.”


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