With stock prices of high growth technology companies in a free fall across the globe, Nithin Kamath, Founder and CEO of Zerodha, has linked the fall to the dot-com era. “The sharp fall in the stock prices of high growth tech companies across the globe is getting crazy, feels like the dot-com boom,” Nithin Kamath said in a series of tweets on Tuesday. Technology stocks, across the globe, have had a difficult time in 2022 so far with most tanking sharply. The tech-heavy NASDAQ index is down 26.5% so far this year.
Nithin Kamath said that India has weathered the storm, referring to the fall in the stock prices of growth tech firms. Listing reasons behind his argument, Nithin Kamath said that the lack of a large number of such high growth tech firms listed on Dalal Street and secondly the massive fundraising by private companies last year has helped India survive the global route.
While Nithin Kamath agrees that the listed high growth tech companies in India have also tanked, he added that there is a limited number of such firms listed and hence haven’t had a large impact on the rest of the markets. “Indian private markets got lucky with all the money that got diverted from China to India last year,” he further added.
However, expectations from firms have now changed in Kamath’s view. “It is ridiculous how quickly the expectations changed from growth at all costs to generating free cash flows to survive the next 2 to 3 years since raising funds might be tougher. It is almost impossible for businesses to quickly adapt, especially the larger ones,” the Zerodha CEO said. With this, the founder of online discount brokerage firm also added that employee stock ownership plans (ESOP) given out by various firms over the last few years may soon be out of money which will force large cuts in employee net worth.
Domestic listed companies have seen their stocks tank in recent trading sessions. Paytm is down 20% in the last one month, Zomato has tanked 36%, Nykaa has dropped 27%, and PB Fintech has dropped 26%.
Nithin Kamath still believes that India’s demographics, the population on mobile and internet, and expected GDP growth are still good selling points, keeping investors keen. “There is a lot of money waiting to enter Indian private markets, $25 billion is what I am told. But FIIs pulling out money from public markets doesn’t add up,” he added.