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business | IST

Big Deal: Experts discuss metrics for new age companies

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In this episode of, ‘Big Deal’, CNBC-TV18’s Nisha Poddar spoke to Siddarth Pai of 3one4 Capital, Gopal Jain of Gaja Capital, Rishi Aswani of Duff & Phelps to talk about unicorn valuations, metrics for new age companies and growth phases of startups.

When we talk about the unicorn IPO boom it has been a mixed bag, with some stocks giving super normal profits to the investors and some making history with their stock market punishment on listing day debut itself! So it’s clear that one needs to cherry-pick and can't paint the entire space with the same brush.
How to find the winning multi-baggers in the new age companies and what are the various factors that play a key role in the valuation dynamics?
Read Here:
In this episode of, ‘Big Deal’, CNBC-TV18's Nisha Poddar spoke to Siddarth Pai of 3one4 Capital, Gopal Jain of Gaja Capital, Rishi Aswani of Duff and Phelps to talk about unicorn valuations, metrics for new-age companies and growth phases of startups.
Is it okay to be a loss-making company and go for a listing in the public market? Jain said, "Indeed, loss-making companies going public is a novelty in India and it is unusual even in a global context. Many new-age companies or most tech companies are profitable, the ones that we know about. Indian investors will take some time to fully understand new-age companies that are loss-making. The typical picture of a blue-chip in India is a company that never raises capital. When do you recall the last time Infosys raised capital or Wipro raised capital or TCS raised capital, or Procter & Gamble raised capital? So I think it is a work in progress."
He added, "One thing is very clear, that not all new-age companies are alike, within new-age companies, there are companies that are profitable, there are some that have a clear path to profitability. Whenever we think of public markets, we have to think about the lowest common denominator, which is a retail investor, perhaps not so sophisticated, someone who is investing his or her retirement money to manage his quality of life for the remainder of his life. I think, therefore, this is a learning phase in which investors are learning how to deal with new-age companies. At the very least, I would say that it is important for investors to satisfy themselves of the path to profitability, and are they comfortable with that path to profitability."
On valuations, Aswani said, "I do operate in the same industry as Gopal and Siddarth. We are doing a portfolio valuation in the private capital industry for investor reporting. We are not involved in IPO pricing, but I can answer your question based on what I have seen through the lifecycle of these companies. The first and obvious clue as to how subjective the valuation will be is by looking at the stage of the company's development itself."
"Nowadays, you have companies that are coming to the IPO that if you would define fully developed as companies that have a history of sustainable earnings and cash flows, they are not fully there yet so obviously the valuation is much more subjective. You have to kind of think about some additional judgement to apply on top of traditional valuation, approaches, and metrics."
For the full interview, watch the accompanying video...