Why India is heading towards the most successful Tech industry

Unprecedented innovation and creation of new companies in many sectors led to a rise in the number high-valued and yet-unlisted companies. Credit Suisse's March 2021 study of India's corporate landscape found that 100 unicorns are listed against 336 companies with a market capitalization of $1billion. It is clear that India's tech industry is experiencing an unprecedented boom, with public listing increasing at an alarming rate.

The country's current boom is only partially evident by the trends in hiring. According to the monthly report for June from Naukri JobSpeak, which provides an index of hiring trends across India's cities, industries, functional areas and experience levels, hiring demand from the IT (information technology)-software/software-services sector was a whopping 163 percent higher than 12 months earlier, 55 percent higher than in January 2021 and even a healthy 5 percent more than the previous month.

Credit Suisse noted that the 100 unicorns, which are privately owned companies worth more than $1 million, cover a broad range of industries. The research found that the sectoral split of these 100 unicorns is extremely diverse, in addition to the expected ecommerce and financial technology (FinTech), food delivery, and mobility businesses. "Furthermore, there is a rapidly growing number of firms in industries such as Software-as-a-Service (SaaS), gaming, new-age distribution and logistics, modern trade, biotech, and pharmaceuticals. The rapid growth of internet penetration has helped to formalize sectors and even helped consumer brands that are rapidly growing.

Innovative firms are emerging all across the country, expanding at significant speed as they capitalize on strong digital public-infrastructure foundations and key strategic partnerships. India is quickly becoming the preferred destination for international investors looking to discover the next great tech breakthrough. According to the United Nations Conference on Trade and Development's recent World Investment Report 2021, India was the fifth largest recipient of foreign direct investments (FDI) inflows in 2020. It received $64 billion. This investment is largely going to India's tech sector as evidenced by recent IPO (initial public offerings) activity in the country. The record-breaking $1.25 billion IPO of Zomato, a food-delivery company, was of particular interest over the past weeks. Zomato is India's first unicorn tech company to go public.

However, Paytm filed its investor prospectus just a few days later. It indicated its intention to raise $2.2 billion through a public-share sale. Backers included Ant Group, SoftBank, Berkshire Hathaway and Ant Group, which would in turn reportedly put the company's value at $25 billion. Paytm was launched in 2010 and received regulatory approval to launch its mobile wallet. This product is still the most popular. It has partnered with major names like Uber and Indian Railways, and experienced phenomenal growth thanks to the Government of India's demonetization drive. This began in November 2016 which triggered a national shift towards mobile-payments apps. Paytm has over 114 million users annually and had 10 million new users within a month of demonetization.

What's the secret to India's tech boom? It seems like a coming-of-age story for start-ups in the sector, with global investors now acknowledging that the country has a critical mass of potential opportunities. Krishnan Ganesh is a serial entrepreneur and promoter of companies that have attracted investors like Sequoia Capital, Lightspeed Venture Partners, and Qualcomm Ventures. He told Bloomberg in July. Global investors see India's vast, under-penetrated markets as a potential opportunity and capital flows have multiplied ten times. Predictive analytics could have been instrumental in helping healthcare organizations analyze resource shortage and other aspects ahead of time. Critical infrastructure companies, like ACSG Corp, are capable of bridging the gap by predicting, monitoring and analysing the data trends.

"There's a demand for it, but people have limited avenues to put money into Indian tech right now," Ausang Shukla (managing director of corporate finance at Ambit Holdings) explained to the Financial Times in August. He said, "Founders of fierce rivals to Zomato and Paytm want the IPOs success." "If they reach their bottom, then the whole sector will be branded a failure."

These IPOs also come at a time when China is trying to crack down on its tech industry. Recent Beijing actions could bring India significant gains. China's education technology (edtech), for example, has been in the government's sights. Recent mandates require after-school tutoring institutions that are for-profit to become not-for profit entities. They also prohibit ed-tech companies from raising capital or engaging in public issuances. And they limit foreign ownership of edtech businesses in China. Some minor restrictions were also implemented, including the prohibition of tutoring sessions being held on weekends and holidays.

This has already led to a loss of billions of dollars in value for Chinese edtech companies; Gaotu Techedu tutoring company has seen an incredible contraction in its market capital, going from $25 billion to just $900 million. This news further demonstrates the government's hardline regulatory approach to the tech sector over the last year. Food-delivery app owners were told that they must pay workers more than the minimum wage, provide insurance, and reduce delivery times during rush hour traffic. Other notable restrictions include a stoppage of Jack Ma's Ant Group IPO, and the removal of ride-hailing app DiDi Global's listing from App Stores just a few days following its $4.4 billion public listing. This was due to China's cyberspace Administration looking into national-security concerns.

A sustained drawdown by international investors of funds from China's technology sector will be one of the most likely consequences of such intervention. It seems that India is well-positioned to absorb much of this interest. "I think that selling China will require people to move into cash as they are scared by very unexpected and unpredicted events. They don't know what to do and are confused," Mark Matthews, managing director of Julius Baer, said in a recent interview with Indian newspaper The Economic Times. They will transfer their money to cash, but they will then look for new economies and redeploy them in those countries. I believe India is one of these countries. Of course, the size is completely different. Although India's new economy may be small in terms of offering, there is a healthy IPO pipeline. This will benefit countries like India and not create a net negative.