Do you think the post-IPO free fall of stocks like Zomato and Paytm impacts investor appetite for upcoming tech IPOs?
IPOs, through their history, have always gone through booms and busts. It’s a pricing game, not a value game. And I think we need to be clear now about who we’re protecting here. Let’s stop acting as if these are poor investors taken to the cleaners; these are traders, they were driven by greed. Markets change moods. If you look at tech companies, there’s a markdown happening. It is true momentum is shifted. But momentum could shift again.
What are the Indian stocks that excite you now?
My guess is you’re going to see something else pop up that’s interesting. Maybe it’s commodity companies. I wouldn’t be surprised if inflation becomes the bogeyman that we think it is; that’s where the next action will be. Not in young tech firms. Think anti-ESG companies. Companies that ESG advocates tell you are evil, are going to become the most interesting.
What’s your take on the LIC IPO?
I think with LIC, you have to think of how good is it as an insurance company. Historically, its benefits came from the fact that it was a monopoly. But the insurance business in India is going to get more competitive. LIC has been forced by the government to be the investor of last resort. You are getting a company that’s going to be handicapped in how it invests its money because the government will stay as an influencer. If I am to invest in LIC, and the government continues to use its capital to invest in companies that nobody else will invest in, at prices they should not be paying, then I would attach a discount to the company.
Where do you think the next round of liquidity for tech startups will come from?
I think of it less as liquidity and more as risk capital. During Covid, one of the things I noticed, which kind of set this crisis apart from all previous crises, was how resilient risk capital was. Venture capitalists stayed in the game, investments in the riskiest companies stayed in the game. And that’s one reason why we came back so strongly from that Covid collapse between February and March of 2020. But there’s always one, one big shock that can cause it to go in under the cover.
To me my biggest concern for this year across the globe is inflation. Because governments for a couple of years around the world have been spending like drunk sailors. And inflation has been deadly for risk capital over history. I would say this also about investment classes like Bitcoin and NFT that have benefited from risk capital. What’s going to happen to Indian tech firms and IPOs is very much connected not just to what will happen to US companies and IPOs, but also to Bitcoin, Ethereum and NFTs as we go through the cycle.
