Quick post. No investment advice here.
The discussions around venture funded tech startups going public at valuations never ever heard before continues, and it seems this chatter will not settle down for a while. Recently I heard this note, only select private investors (angel or venture or private equity) have access to the massive wealth creation opportunities in private markets and the only way retail investors can join the party is participate in IPOs (for listing gains).
This is wrong advice in my opinion, possibly out there with an inclination towards getting retail investors to participate in these IPOs. Retail investors like you and me can very well enjoy the party and make super returns in investments - possibly even without taking as many risks as private investors do. I will talk here about Fintech, and you can similarly connect the dots here for other sectors too.
Fintechs going aggressively ahead for growth is good news for many publicly listed companies. Here are few examples -
Banking: Neobanks like Jupiter, Fi Money, and others are building their banking stack and experience on top of Federal Bank (listed). Niyo is building on top of Equitas Small Finance Bank (Listed). Customer acquisition & growth for any of these neobanks, would be more retail savings accounts, salary accounts, debit card transactions, UPI transactions for the associate banks.
Insurance: India’s largest tech startup in insurance distribution - Policybazaar is now going public. They will continue to focus on growth. Large fintechs like PhonePe, Turtlemint, and many medium and small fintechs will want to distribute insurance products to their audience. There are many employee focussed health insurance startups like Plum Insurance, PazCare, Nova Benefits, and others now bringing healthcare benefits to small and medium sized organizations. Who is to benefit? Large insurance companies that are listed - SBI Life Insurance, HDFC Life, ICICI Lombard, ICICI Prudential Life, and others.
Mutual Funds: There are many investing platforms available in India, many of these have quickly went on to become the largest distributors for Mutual Funds or AMCs (Asset Management Companies) - noticeable few - Paytm Money (disclosure: founded be me), ET Money, Groww, Scripbox, Fisdom, etc - focus on getting new investors to invest in Mutual Funds. While their avg investment amounts are relatively smaller compared to old industry peers like say ICICI Direct, and others - these sheer number of investors has resulted in sizable volumes.
Most of these startups are offering direct mutual funds - where they don’t get any distribution commissions from AMCs, it’s all digital and it’s all free. What does this mean - AUM collected by AMCs from these digital, direct (and free) channels is the most profitable AUM in their business. Who benefits - all AMCs, and bunch of them are listed - HDFC Mutual Fund, Aditya Birla Mutual Fund, UTI Mutual Fund, Nippon AMC, and many like SBI, Kotak, Motilal Oswal, Axis Mutual Funds via their respective financial groups which are listed.
Stock Brokers: Hot hot space, and we are building Dhan (first wealth product by Raise). Post covid, this sector has exploded and market participants like Zerodha, Angel Broking, Groww, ICICI Securities, Upstox and many other leading the pack - together between them, they are adding 12-15 Mn demat accounts a year - which means they are nearly doubling the industry every year. Insane growth. Among these are listed players - Angel Broking, ICICI Securities, and a few smaller ones.
Market Infrastructure Companies: If consumer plays are happening, there is also super value to the underlying infrastructure that helps it run them. Who are these players - CAMS (RTA that is powering some of India’s large Mutual Funds), BSE & MCX, hopefully NSE lists soon - who are biggest beneficiaries with incoming new investors via tech platforms, and of course also CDSL (including CVL which is its subsidiary) - all your demat accounts are created in CDSL when you open your investment account on Dhan - and similarly to my knowledge all of 8/9 out of 10 large stock broking platforms use CDSL for demat services.
Payments: Let’s agree here to the indisputable fact, India is the most advanced country today when it comes to payment. Who are the biggest drivers here - when it comes to online & consumer payments - it is PhonePe, when it comes to merchant and POS payments - it is PineLabs, and when it comes to payment gateway aggregation - it is RazorPay. Hope to see these startups go public soon, but what would be super awesome will be an IPO of NPCI. Fingers crossed.
Credit Cards: There are many startups in tech that are issuing credit cards today, both on the Consumer and Corporate / SME side. While I have not tracked the Corporate or SME side of the story - the bit known on the consumer side is OneCard, and the immensely popular and super large player who is doing amazing things here silently is - Amazon Pay. Who’s their partner - ICICI Cards, part of ICICI Bank.
So next time someone tells you it is not possible to join the party where private tech investors are putting sizeable investments in tech startups, just connect the dots from all the information in the public domain, and you may be able to find something of value
Once again, this is not investment advice. Do your own research before you make any investment.