Paytm founder Vijay Shekhar Sharma says surge in startups' valuation here to stay

Indian startups are not overpriced and “many are underestimating what India’s opportunity will be,” Vijay Shekhar Sharma, founder of Paytm said.

Vijay Shekhar Sharma is the founder and Chief Executive Officer of Paytm, which has raised $2.5 billion in an IPO this week. (MINT_PRINT)

The wave of surging valuations for India's technology startups is here to stay as the country offers a great opportunity in terms of growth, according to the founder of the Indian online payments pioneer that raised funds in the nation's biggest initial public offering ever.

Indian startups are not overpriced and “many are underestimating what India's opportunity will be,” Vijay Shekhar Sharma, founder and Chief Executive Officer of Paytm that raised $2.5 billion in an IPO this week. “If we go by anything that happened in the US, China, or other parts of the world, including Indonesia, India is an opportunity which will dwarf many other countries' startup or technology ecosystems,” he said at the Bloomberg India Economic Forum, Thursday.

Lured by the opportunity, investors have poured in $7.6 billion into Indian fintech companies, nearly four-fold the amount their Chinese counterparts drew, according to researcher Tracxn. Digital startups in other sectors, including FSN E-Commerce Ventures Ltd., the entity that operates the Indian beauty startup Nykaa, and food delivery app Zomato Ltd., have also seen overwhelming demand for shares.

An open-network is luring hundreds into the fintech space in India including Alphabet Inc.'s Google, Walmart's Phonepe and Amazon.com Inc. leading to a world-beating digital payments surge. Digital payments grew five-fold in the last five years and is estimated to touch $2.2 trillion by March 2023 while digital lending is seen trebling to $350 billion. Such out-sized growth of the Indian fintech industry risks regulatory censure.

Providing clarity on the regulations, helping easy exit for funds from start-ups, creating a local pool of capital from investors and avoiding retroactive taxation will open the flood gates of money further, said Vani Kola, the founder of early-stage venture capital firm Kalaari Capital at the event.

SoftBank Can Invest $5 Billion-$10 Billion in Indian Startups in 2022

(Bloomberg) SoftBank Group Corp. can invest $5 billion to $10 billion in India next year if it finds valuations attractive, said Rajeev Misra, chief executive officer of SoftBank Investment Advisers.

“If we find the right companies, we could invest $5 billion to $10 billion in 2022,” Misra told Haslinda Amin at the Bloomberg India Economic Forum on Thursday. “If we find the right opportunities at the right valuation.”

So far, investments in India haven't disappointed the Japanese giant with its portfolio of startups in the country sitting atop sizable gains in valuations. SoftBank is planning to raise the stakes in India -- having invested $3 billion in 2021 -- just as global firms grow more wary of bets in China with tighter regulations across a number of industries hurting deals there.

India has been a bright spot for SoftBank, whose Vision Fund reported a record loss of 825.1 billion yen ($7.2 billion) for the quarter ended in September, on the decline in value of public holdings such as the Korean e-commerce giant Coupang Inc. and the Chinese ride-hailing giant Didi Global Inc. The Japanese company invested early in the Indian market, taking a stake in ride-hailing giant Ola and e-commerce leader Flipkart, before its acquisition by Walmart Inc.

SoftBank also invested in digital payments pioneer Paytm, which is poised to raise $2.5 billion in its initial public offering. Oyo Hotels & Homes, also backed by SoftBank, filed preliminary documents for an 84.3 billion rupee ($1.1 billion) initial public offering in October.

India's tech ecosystem is taking off and SoftBank's patience will be “rewarded,” Misra said. “It is India's time.”

Here are some of Misra's other comments at the event:

The quantum of capital we are able to invest today is not as high in India because the startup founders are not raising as much money

Fintech is the biggest opportunity in India partly as financial inclusion and credit availability is a must for India to become a $5 trillion economy. Education is another sector where SoftBank is looking to invest in the nation

The company has an investment team of over a dozen in India, perhaps the biggest team for foreign investment in the country