NYU finance expert Aswath Damodaran has offered a sharp analysis of some of India’s biggest companies—Reliance, Tata, Paytm, and Zomato—in a recent interview to ET Now, giving investors plenty to think about.
Known as the "Dean of Valuation," Damodaran outlined where these companies are in their life cycles and what that means for their future. He also identified the healthcare sector as the next big space to watch in India, signaling where investors might want to focus their attention.
On Reliance’s balance of old and new Damodaran views Reliance as a fascinating case study of balancing established and emerging businesses. He pointed out that Reliance’s petrochemicals division, a "middle-aged" company, generates the bulk of the cash flow. “Petrochemicals is a cash cow,” Damodaran said, but added that Reliance Jio, the younger, high-growth part of the business, is still burning through cash to scale. This dynamic, he explained, is normal for companies with both mature and growth-focused divisions.
“Middle-age is not bad; it just means you have to act your age,” Damodaran said, highlighting that a business’s ability to manage its life cycle determines its long-term success. He believes Reliance’s diverse portfolio, with a mix of middle-aged and younger entities, is well-positioned to navigate future growth.
Paytm vs. Zomato When it comes to India’s tech scene, Damodaran offered contrasting views on Paytm and Zomato. While both are young, app-driven companies, they are at different stages of their growth journeys. According to Damodaran, Zomato has begun maturing as a business, recognizing that scaling up is only part of the equation. “Zomato is starting to grow up,” he said, pointing out its focus on monetizing its business and making it sticky. The acquisition of Blinkit, a quick commerce platform, was a move that impressed Damodaran, allowing Zomato to expand beyond its core restaurant delivery business.
However, Paytm tells a different story. Damodaran was less optimistic about its trajectory, saying the company still seems overly focused on growth at the expense of a sustainable business model. “Paytm hasn’t come to that realization yet, and I’m not sure they ever will,” he said, noting that unless Paytm pivots toward profitability, its long-term outlook remains shaky.
Tata’s turnaround On Tata Group, Damodaran was more optimistic than in previous years. He noted that Tata has made significant strides in recent years by acknowledging the reality of its aging companies. “TCS was dragging along some aging businesses, but they’ve now done a good job of being realistic about what those companies can actually do,” he said. Damodaran praised Tata’s willingness to revamp its approach, focusing on the strengths of TCS while managing the limitations of its older companies.
The next big thing Looking ahead, Damodaran identified healthcare as the sector to watch in India. He believes the growing demand for medical services as India’s population becomes wealthier could make healthcare a game-changer. “Healthcare has the potential to change the lives of millions of Indians,” he said. Damodaran also pointed out that Indian healthcare companies have a unique opportunity to innovate, free from the burdens of legacy systems that make the U.S. healthcare industry inefficient and expensive.
Damodaran is keeping an eye out for young companies in the healthcare sector that might not seem as exciting as app-driven businesses but could offer significant long-term growth. “Investors might overlook them at first, but these companies will likely be undervalued and present real opportunities,” he concluded.