The Shape of Things to Come

Can you guess the names of the six most valuable US companies in 2004? They were GE, Exxon, Microsoft, Pfizer, Citi and Walmart. That’s right, not a single FAANG stock. Today, the top names are Apple, Microsoft, Google, Amazon, Facebook and Tesla. The old order has made way for the new. Prepare yourselves, for such a change is coming to India, sooner than you think. The journey has begun.

Less than 1 per cent of India’s market capitalisation is accounted for by digital- or internet-based enterprises. In the US, this number is 40 per cent. But, we already have 60 unicorns here and that number will probably grow to 200 by 2025. And that is a conservative estimate. Will we have our own FAANGs then? Sure, but maybe by another name. Seeing the headiness around start-up valuations, it’s tempting to christen them the BOOZINGUPs—after Byju’s, Ola, OYO, Zomato, InMobi, Nykaa, Grofers, upGrad and Paytm. More listings may pave the way for better acronyms, but the trend is unmistakable—of more and more digital enterprises rising in size and stature, to replace the stars of yesteryears.

So, how will the Sensex look like in 2030? Here is a sacrilegious prediction. These 10 companies—ONGC, M&M, Axis Bank, NTPC, Power Grid, ITC, IndusInd Bank, Tech Mahindra, Bajaj Auto and Titan—will no longer be part of the index. They will be replaced by names such as Byju’s, Paytm, PharmEasy, Flipkart, Ola, Zomato/Swiggy and their ilk. Many may even weave their way into the list of our top 10 most valuable companies, just as it has happened in the US. This does not mean that manufacturing and financial giants will wither or perish, just that the internet-based ecosystem will harness much of the consumer demand that keeps India ticking, in turn adding humungous value to such enterprises. The pace at which these companies can scale up, after all, is incomparable to the relatively stodgy pace at which manufacturing companies can grow by adding layers of capacity. A Tata Steel may take years to set up a greenfield project, from planning to commissioning, but a Byju’s can add millions of new students and double its turnover in a single year. Such is the beauty of the digital world. Why do you think Mukesh Ambani spends so much time these days gathering billions for his Jio Platforms? Because he sees that the future is not oil or petrochemicals, but digital.

This trend will also create a new crop of uber-billionaires, many in their thirties and forties. But India’s wealthiest need not worry. They will not be knocked off their perch in a hurry as their companies are from the top of the pecking order. This is because the new digital entrepreneurs don’t share the same fixation about holding dominant shareholding in their enterprises. The previous generation was different, in that they used debt to fund their expansion and rarely allowed their family stakes to dip below 50 per cent, or at least 26 per cent. Today’s entrepreneurs use equity as their growth oxygen and aren’t shy of diluting their stake repeatedly to grow their companies. Zomato created a stir recently when its market value crossed Rs 1 lakh crore, but its promoter Deepinder Goyal owns only 5 per cent of the company. He isn’t exactly poor, but certainly not a multi-billionaire, as any old generation promoter of a company of such value would be. It’s a generational shift in mindset, to enjoy creating and being part—albeit a smaller one—of a highly valuable enterprise, without obsessing about personal wealth beyond a point. How much can one spend in a lifetime, anyway?

Such a massive change will inevitably have a collateral impact. India’s retail, healthcare, education, transport and financial landscapes are set for a major overhaul. The first signs are visible in how dramatically Amazon and Flipkart have altered the Indian retail scene in the past five years. A company like Ola could do the same to more traditional auto manufacturers if it steals a lead in the electric vehicles march. Enterprises like Paytm could render many existing financial powerhouses redundant as effortlessly as discount brokers like Zerodha have displaced established leaders. The recent instance of BharatPe and Centrum coming together for a banking licence could contain hints at what is to come. Smart business leaders can see this coming and are preparing for it. One can see Bajaj Finance readying its arsenal to compete in the digital arena, but where would it leave the stodgy public sector? The pace of erosion of the Indian public sector’s market share in every sphere will only be hastened by the rise of the Indian unicorns. There may not be any public-sector entity in the Sensex, other than SBI, by the end of this decade.

There will also come a time, soon, when the sheer value of digital corporations will enable them to snap up businesses in the physical world, with the aim of buttressing their delivery infrastructure. Online pharmacy PharmEasy’s recent acquisition of Thyrocare is a classic example of the possibilities of this phenomenon, as is Byju’s billion-dollar acquisition of brick-and-mortar tutorial chain Aakash Educational Services. It is just the tip of the iceberg. The country is headed for mind-numbing inorganic moves, with many old generation tycoons cashing out of their established businesses before it is too late. The internet is a young woman’s game, not for ageing patriarchs or those not fleet of foot.

Exciting as all this is, it still remains to be seen if we can throw up digital entrepreneurs of global scale. In this, India has always been a laggard; China has fared much better. Could any of our unicorns transcend boundaries and create a platform or product that works globally? Byju’s is trying to do this, and it would be interesting to see if others follow, or remain satiated with the huge domestic opportunity. Finally, what would be truly refreshing is to see these wonderful young entrepreneurs celebrate their success by embracing all that their forebearers eschewed in most part—a greater awareness of the environment, an inclination to share their wealth with the less fortunate and, finally, to lend their voice and support to creating a better, more inclusive, India. That would be worth much more than all their trillions.