The world as we see it : We are witnessing an interesting phenomenon
Global
These are interesting times. The simmering US-China trade troubles, global geopolitical challenges and macroeconomic stress seems to have sent the global economy in turmoil. Inflation expectations keep declining even as the world drowns in debt. Debt levels across many economies have ballooned to about 250% of GDP, indicating that there is enough incentive for rates to be kept low. In fact, rates in a few countries are already in the negative territory. Such situations typically lead to asset bubbles in some parts of the economy, increasing difficulties in managing things when the next downturn occurs. It seems to be a matter of time until kicking the can doesn’t remain an option. That said, we find India in a much better place despite its numerous challenges. And we are glad that we can say this.
Local
India has its own set of challenges, some homegrown and others linked to global factors. In line with a global slowdown, GDP growth in India for FY19 came in at a five year low of 6.8%. Overall liquidity in the system remains a challenge with the ongoing NBFC credit freeze impacting business operations across a variety of businesses. The RBI is working closely with banks to pass on these lower rate benefits to banking sector customers. With the elections giving the government a firm mandate and the financial budget for the year out of the way, we expect the government to get down to business and focus on growth and employment. Recent turmoil in the stock markets notwithstanding, the short term pain in the economy is paving a path for longer term structural benefits.
Six months after bidding adieu to a blockbuster 2018, a year that saw eleven Indian startups hit the coveted ‘Unicorn’ status (startups valued at US$1 billion or more), we seem to be on track to beat that record this year. The first half of 2019 saw seven1 startups across sectors reach unicorn status: Icertis, Druva, Ola Electric, Delhivery, BigBasket, Rivigo and Dream 11.
As the ecosystem matures, we are witnessing an interesting phenomenon, where investors are seeking to invest capital into a concentrated pool of opportunities, as can be seen in the over US$10 billion of invested capital in the last two years, coupled with rising average deal sizes.