Hundreds of layoffs at several Indian start-ups have sparked fears the bubble is starting to burst for the country’s e-commerce companies, amid claims by analysts that many of them are overvalued.
Restaurant search Web site Zomato, food delivery app TinyOwl and property portal Housing.com are all letting staff go, and experts are warning of echoes of the dot-com boom which crashed spectacularly in 2000.
“The valuation bubble is bursting. The valuations had reached levels where they were ridiculous and could not be justified at any level,” said Arvind Singhal, chairman of management consulting firm Technopak Advisors Pvt Ltd.
Photo: AFP
Wealthy investors boosted by low interest rates have been lining up to lavishly back India’s booming start-ups, with the government hailing the sector as proof of the country’s entrepreneurial spirit.
Indian Prime Minister Narendra Modi views online start-ups as key to providing jobs to aspirational young Indians, seeking to fuel the sector through a government campaign, “Start up India, Stand up India.”
In September he visited Silicon Valley, calling on deep-pocketed investors to turn their attention to India’s thriving start-up ecosystem, with large tech hubs in the cities of Bengaluru, Hyderabad and Mumbai.
Yet despite the billions of US dollars invested in recent years, most of India’s online start-ups are yet to turn profits and investments are largely based on speculative future earnings.
“Investors are not looking objectively at the sector right now. They are just seeing a few success stories and ignoring the failures, just like they did in the dot-com era,” said Paras Adenwala, investment consultant at Capital Portfolio Advisors in Mumbai.
Adenwala is concerned that once the US central bank starts moving on interest rates, as it has long been tipped to do, investors would be less generous with their cash, making the situation worse.
“You would see a lot of these start-ups falling by the wayside once the US Federal Reserve starts raising rates and funding dries up,” he said.
Recent job cuts at TinyOwl Technology Pvt Ltd, Zomato Media Pvt Ltd and Housing.com suggest that not all is well.
TinyOwl co-founder and chief executive Harshvardhan Mandad said the redundancies had been necessary to get the start-up on a more sustainable footing, while an official at Zomato said the restructuring that led to the redundancies was based on a business call.
“I do not think that the pace of growth has suddenly slowed. Is the market correcting? Perhaps it is and I guess it’s about time that happened as well,” said the Zomato official, who asked not to be named.
Grofers, a “hyperlocal” grocery app that allows customers to order goods from corner shops online, last month made two acquisitions in a week, taking over its shuttered competitor Townrush and meal delivery service SpoonJoy.
And earlier this month Mumbai-based CarTrade, a portal for selling used autos, acquired its rival CarWale for an undisclosed sum.
Singhal sees the job cuts as part of an inevitable “evolution” of start-ups, where the early movers lacked well thought-out business models but successors are to learn from their mistakes.
“It would encourage new start-ups with clearer plans,” he said.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
PRESSURE EXPECTED: The appreciation of the NT dollar reflected expectations that Washington would press Taiwan to boost its currency against the US dollar, dealers said Taiwan’s export-oriented semiconductor and auto part manufacturers are expecting their margins to be affected by large foreign exchange losses as the New Taiwan dollar continued to appreciate sharply against the US dollar yesterday. Among major semiconductor manufacturers, ASE Technology Holding Co (日月光), the world’s largest integrated circuit (IC) packaging and testing services provider, said that whenever the NT dollar rises NT$1 against the greenback, its gross margin is cut by about 1.5 percent. The NT dollar traded as strong as NT$29.59 per US dollar before trimming gains to close NT$0.919, or 2.96 percent, higher at NT$30.145 yesterday in Taipei trading
RSS