There appears to be a massive wealth effect going on in India. A variety of factors — partly because of the newly minted unicorns in the country and, partly because of the big bull run in the stock market — have helped in this wealth creation. What are your key observations this time when you are preparing the rich list?
One of the key observations that I have had after doing research for the last 10 years is that India is possibly witnessing the fastest wealth creation era in its history and things have changed very much from when we started the list in 2012 to what it is right now 10 years later.
One of the very interesting highlights that I want to point out in this year’s list is that in 2012 when we did our first IIFL Wealth Hurun India Rich List, we had absolutely no entrants for the software product sector. Fast forward 10 years, now we have about 73 founders or co-founders who are building amazing software, tech product companies based in India. Over the next five-ten years, this number is going to exponentially grow and that is one very interesting trend.
And there are quite a few other things that are there in the list. For instance, in 2012, the size of the list was just 100, now the list has gone on to include 1,007 individuals while the number of billionaires in India have grown from 54, 10 years back to about 237.
Another interesting trend in this year’s IIFL Wealth Hurun India Rich List is in 2012, we could find about 10 Indian cities in the rich list, that means there were entrepreneurs from about 10 cities. Ten years later, we could find about 76 Indian cities from which these entrepreneurs have come. So wealth creation is going across sectors, across cities, across geographies and more and more young wealth creators are coming on board. It is quite promising from that perspective.
So not only are Indians getting wealthier, more and more Indians are getting wealthier and the wealth effect is broadening out in the country as well. We did see the recent Lamborghini commentary that more people are ordering Lamborghinis from non-metros. As new age technology companies in consumer tech, edtech, become more valuable with global dollars coming in, the employees, the founders and the entire ecosystem are benefitting from that. What are your thoughts?
In 2011, India had its first unicorn InMobi. Since then, every year we have sort had one unicorn per year and so on but over the last couple of years, the number of tech companies that had valuations of more than a billion US dollars has been growing dramatically. One of the things that has contributed to it is of course India’s demographic, which is quite dynamic and quite promising. But more than internet penetration thanks to companies like Jio which has made internet more accessible to not only these companies to build amazing products but also to consumers to use these products and that effect is going to further increase and we have only scratched the surface here.
We have started creating more very valuable companies from the electric vehicle (EV) sector considering India’s population, rising income levels and so on. That is a new sort of tech or innovation that will have a much broader effect on the wealth creation ecosystem. Then we have seen super valuable companies from AI or block chain or those exotic sectors. So there are still a lot more sectors that are yet to be explored in tech. Considering the sheer activeness in the Indian demography and also the rising income levels, in five years from now, one would have at least 500 entrants from the tech sector in the rich list in 2025, 2026.
The Indian corporates as a whole in the last couple of years and quarters have become much more efficient; balance sheets have become much leaner and a huge amount of debt has been repaid. In the bargain, the valuations have gone up. Has that also a role to play in the wealth effect?
You are absolutely correct about it. It is possibly one way to look at the whole thing as investors’ affirmation on the prospect of Indian corporates or Indian companies, because of which, Indian companies have become pricy or super valuable. The points that you mentioned right now and I agree with you completely is because of that, the multiples have gone up and that has impacted the overall value of the business.
So yes, that has had an impact on the overall multiples and impact on the overall valuations.
Could you also give me a view on what is the role of the policymakers and environment enablers and regulators in this?
The stories of the entrepreneurs basically tell the stories of modern Indian economy and the role that the government has played in terms of start-up India, stand up India scheme, the PLI scheme, the lowering of corporate tax rates etc.
All that has had an impact on the value of the business and on these companies being able to incentivise on their core areas. That has had an impact and these are some of the initiatives that have a direct impact on value creation, both from start-up and core business standpoint.