Corporate world’s winners look to carry on

Paran Balakrishnan | Updated on: Dec 21, 2021
image caption

Companies in the start-up and IT/ITeS space that got a tailwind from Covid fallout are hoping for an even better 2022

Does anyone remember the joy that erupted on December 31, 2020? “At last, this accursed year is behind us,” tweeted one optimist. It didn’t take long to discover how misplaced our hopes were. This year, the dreaded word on everyone’s lips is Omicron. Already, there are warnings fourth-quarter global growth will be halved. So, we’ll raise a glass of cheer on New Year’s Eve but look forward to 2022 with considerable misgiving. People will sip their champagne and say: “Inshallah, things will be better.”

But let’s forget all that for a moment and turn to a few companies and sectors that got a tailwind from trends that emerged in Covid-19’s wake. These are companies that had a good 2021 and are looking forward to an even better 2022, pandemic notwithstanding.

For starters, consider Amit Ramani and his Awfis co-working company, which benefited from the WFH trend when companies began questioning whether they needed expensive office space and started examining halfway alternatives. That’s where Awfis and other co-working companies came into play. Awfis has leapt from 50 centres to 106 in 14 cities. What’s more, it’s stretching beyond top metros to tier-2 cities like Indore, Bhubaneswar and Jaipur. Building on this momentum, Ramani is hoping next year to expand to 200 centres including possibly Coimbatore, Nagpur and Lucknow.

Demand has quintupled from pre-Covid days. Says Ramani: “We were doing 1,000 seats a month pre-Covid. Now we do 5,000.” In earlier years, Awfis mostly sold space to smaller and mid-size clients, SMEs and start-ups, companies wanting fewer than 500 seats. But once Covid-19 upended everyone’s lives, big corporations started looking to move into co-working spaces. Says Ramani: “Today, 500 seats and more has become 40 per cent of the market.”

Another boom industry has been IT/ITeS. As the corporate world raced to go digital, some analysts forecast Indian software services firms would see explosive growth on a 1990s scale. In the event, the market’s moved slower than expected. There’s been a huge flow of small deals but fewer mega-deals. Still, even that could be a good sign. Says Pareekh Jain, CEO, Pareekh Consultants: “It’s not that only a few companies or countries are moving. Everyone’s moving into digital.” Jain also notes crucially: “India is the only country where you have scale.”

Challenges at home

But now the industry also faces a host of domestic challenges — mainly because there’s now competition for talent. Firstly, the start-up sector is grabbing smart graduates lured by the excitement of creating something new and chances for share options. It’s thought 200,000-300,000 people may have moved to start-ups. There’s a second reason why the software services industry’s allure has diminished. In the past, people who worked in a software services company could expect US or other international postings. Now there’s more local hiring and less need to send staff for onsite projects. Visas have become tougher and Covid-19 has stalled travel plans. “Global opportunities are diminishing,” says Jain. Nevertheless, the industry has hired up to 300,000 people this year.

The stars, though, of the last few months have been the start-ups. In January 2021, analysts were still debating whether Indian start-ups should list on New York’s Nasdaq or try their luck in the Indian market. The argument went the Nasdaq had seen many start-ups that ran up gigantic losses before becoming big winners and investors had the experience to assess such companies’ viability. Indian investors, went the logic, were unsophisticated and would be daunted by companies growing at a hectic pace but had red ink all over their balance sheets.

In fact, we now know loss-making Zomato paved the way for a start-up IPO boom. And Indian investors turned out to be perfectly capable of judging winners from losers. Zomato was a huge hit and so was online beauty products retailer Nykaa. Paytm, however, fared far less well with its overpriced $2.4-billion IPO. Others, too, sank below their issue price. Says Pranav Pai, 3one4 Capital founding partner: “The Indian markets proved investors were sophisticated. Not every IPO worked. If a listing had a sound story, the market voted in favour of it. Some weren’t ready and the market voted against them.”

The big stars of the start-up world were fintech companies like Paytm and Policybazaar and also SaaS companies like Freshworks, which listed on Nasdaq in September and is valued at $13 billion. In the coming year, more IPOs are in the pipeline from sectors like medical devices and semiconductors.

India now also has 78 unicorns. Pai reckons even if there’s an economic downturn, “resilience is now part of their DNA. They’ve been tested already and they’re not going to forget that experience. Equally importantly, they have hundreds of millions of dollars on their balance sheet. They can keep growing and retain their employees when the next correction comes.”

Political front

Politically, too, 2021 had its explosive moments. India’s ties with China have remained tense, though the two armies pulled back from their closest eyeball-to-eyeball positions. Looking at next year, lawyer Santosh Pai, who has extensive corporate experience of China, points out that till three or four years ago, the Chinese were hoping to build their superpower status by going global with the Belt and Road project. Now, there’s been a sudden inwards turn, partly because the Americans showed they were determined to see China did not rise beyond a point.

Also, China’s leaders opted suddenly to put the domestic economy in order, cracking down on the tech and property sectors and spooking foreign investors. Says Manoj Kewalramani, Fellow, China Studies at the Takshashila Institution: “From an economic point of view, China’s focus will be on stability, though that doesn’t mean things will return to the way they were for the property or the technology sectors.”

Intriguingly, Tass has reported that a three-way summit between Prime Minister Narendra Modi, President Vladimir Putin and President Xi Jinping may take place soon. The last RIC (Russia, India, China) meeting was in 2019 before the Ladakh stand-off so this gathering will be watched closely by analysts globally. China will start the year with the Winter Games and later move on to the crucial 20th Party Congress later in the year. Even if key players may possibly be axed, it’s a safe bet Xi will hold onto his top job.

We’ve looked at some of the corporate world’s winners but the topmost worry on everyone’s minds as the new year dawns will be the fast-spreading Omicron. Will it be as devastating as the Delta wave? We can only wear our masks, keep our fingers crossed, let the scientists do their work and hope for the best. Stay well.

Published on December 21, 2021

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

  1. Comments will be moderated by The Hindu editorial team.
  2. Comments that are abusive, personal, incendiary or irrelevant cannot be published.
  3. Please write complete sentences. Do not type comments in all capital letters, or in all lower case letters, or using abbreviated text. (example: u cannot substitute for you, d is not 'the', n is not 'and').
  4. We may remove hyperlinks within comments.
  5. Please use a genuine email ID and provide your name, to avoid rejection.

You May Also Like

Recommended for you