Mamaearth: Do Indian private market investors need to reevaluate? Another VC-funded initial public offering, another failure?

 Mamaearth: Do Indian private market investors need to reevaluate? Another VC-funded initial public offering, another failure?

The growth narrative of India is the most significant in the world in the twenty-first century, and those who embrace it will soon have the opportunity to enjoy enormous benefits.

The secret to success in India's private markets is to identify industries with growth rates of between 15 and 20 percent per year and specific businesses within those industries that are attaining even greater growth rates of between 30 and 50 percent.

What one element unites India's modern startup initial public offerings (IPOs)? Following listing, the share values of all of them have drastically decreased. The most recent, Honasa Consumer, the company behind Mamaearth, a line of cosmetic goods, has proceeded in a similar manner. Within the first two days of listing, the stock fell 11.3 percent, meaning that individual investors lost money on their investment once again.

What are the investors consistently making mistakes with?

To put it simply, investors have been making poor choices regarding capital structures and company strategies, with investment returns predicated on dubious premises. Due to India's distinct market dynamics, the "X For Y" model—the holy grail for private market investments in the country—does not work there for early and growth stage investments. An India-centric strategy is necessary while investing in India.

Nonetheless, the difficulties encountered by Indian businesses sponsored by venture capital may not always reflect the wider market. There are a number of reasons for these difficulties, but one of the main ones is that business concepts that weren't appropriate for the Indian market were pushed through. India's distinct features, such its quick uptake of digital payments, mobile technologies, and cashless transactions, highlight the need for customized business strategies. Certain investments in the area have not been as successful because of a failure to recognize and adjust to these idiosyncrasies.

The private markets in India have immense potential.

The top 30,000 unlisted private firms in India generate $150 billion in EBITDA (profits before interest, taxes, depreciation, and amortisation) and $1 trillion in sales annually.

The fall of the Honasa shares after the IPO demonstrates that, in order to significantly accelerate Indian development and investments, investors and businesses need to reach out to Indian private market enterprises in order to increase employment, FDI, and investor returns.

How important is India's private market, one may wonder. In a nutshell, it's enormous and expanding quickly. It's not only about starting new firms; the top 30,000 unlisted companies in India's private marketplaces now make over $100 billion in revenue. Now is the moment to start reaping the benefits, and investors need to realize the enormous potential that lies ahead. Although the market is presently valued at $1 trillion, estimates indicate that it will grow to $10 trillion over the next 20 years.

releasing growth and producing profits

Modern Indian businesses need funding, but they also need the trust of the general public and individual investors. The secret to overcoming the issue is realizing India's potential, which entails figuring out how to expand on the top 30,000 already operating businesses, followed by the next 30,000, and so on.

Finding industries developing at a pace of 15-20 percent per year and specific firms within those industries rising at even faster rates—30–50 percent—is the secret to success in India's private marketplaces. Investors may have a significant impact by giving these businesses the funding they need to expand. Getting into partnerships with hundreds of these tiny, fast-growing companies is the true potential in India's private marketplaces.

America's economic expansion in the 1970s and 1980s—which helped the country rise to prominence in the world economy—was based on giving its MSMEs access to finance via the country's bond, equity, and platform structure markets. The internet's growth was made possible by the MSME cable companies, and this ultimately gave rise to Google, Facebook, and Amazon. Thanks to liquid, deep, and lucrative financial markets, the modest cable providers in rural Colorado lay the groundwork for the massive American Internet economy.

Planting the seeds for eventual harvest

India and its investor base need to empower the 30,000 Indian private enterprises and similar businesses in order to really develop new generation internet businesses that can generate long-lasting business models, produce value for VC investors, and allow regular investors to enjoy the rewards. These tiny businesses may be found in every industry, including information services, car ancillaries, and rural cable.

India's development narrative is the most significant one in the world in the twenty-first century, and those who embrace it will soon have the opportunity to enjoy enormous benefits. As the ageless wisdom of Warren Buffett tells us, genuine riches are found in the little things and the chances we pass up. India's private marketplaces are evidence of the "missing middle's" unrealized potential, which is the secret to unmatched success.

These corporations provide $1 trillion in sales and $150 billion in EBITDA. MSMEs in India will propel the country's progress in the future as it solidifies its status as a major global economic force. Investors need to understand that the key to helping India develop the next wave of Internet enterprises is to expand upon the $1 trillion in smaller businesses now operating there. Unlocking genuine value in the vast Indian consumer market requires understanding Indian private markets, which are a goldmine.