Start'Ups'&'Downs'


Whenever there is a discussion about Startups one common opinion among experts is “In India 95% Startups fail”; obviously there are some who have been successful and established themselves as strong and emerging players like Swiggy, ixigo, Ola etc.
When I read various report, articles, papers on this subject I have found reasons behind Startups’’ failure - some of them are -
1.       Lack of experience
2.       Business models are not sustainable
3.       Failure in market capture
4.       Less scope of growth
5.       Financial issues
Business might make losses in the initial period but after some point of time it has to achieve Break-Even Point.
Any Business’s survival depends on how much loss the stakeholders are able to digest. If Investors don’t see much improvement in the situation they might pull curtains off to the business, If they can bear more loss and are more optimistic about future they will go ahead
Now let’s keep startup aside for a while & focus on very important financial movement –

People’s Bank of China (PBoC) purchased 1.75crore shares in HDFC i.e.1.01% of shareholding
(nowdays anything from China will be glanced by suspicious look so did with above news)
But we always get to know the half-truth lets dig up some numbers 

Major Investors holding stake in HDFC Ltd (Abstract)
Sr.
Name of Institutional Investor
March 2020
Dec 2019
1
LIC
4.67%
4.21%
2
Invesco Developing Market Funds
3.33%
3.48%
3
Govt. of Singapore
3.23%
3.32%
4
SBI ETF NIFTY 50
2.55%
2.24%
5
Vanguard Total Int. Stock Index Fund
1.74%
1.61%
6
People’s Bank of China
1.01%
0.8%
(source 1)

PBoC rose its stake in HDFC by 0.21%, but the message was loud and clear. This could be China’s slow poisoning strategy, because whole world is busy in the fighting against Corona at the same time China could increase its stake in world’s emerging financial institution; Emerging economies could be their target. Next target could be Europe!
But, this act was taken seriously by the Indian govt. which resulted in decision of –‘Blocking automatic FDI / Routing FDI through Govt. for neighbored countries’ currently 7 countries comes under this decision, Govt. went one step ahead, now this would also include companies from other than neighbor countries who have companies in the above list as associate / subsidiary / holding company .
This decision is right or wrong that is another debate
No one can doubt that this decision was taken to prevent our companies / institutions from Dragon’s invasion.
China responded this act immediately as expected with objections such as – ‘this is violation of WTO agreements, this is against liberalization & so on’!!!
So what is the chronology between this decision and startup, Samjhiye
China’s investment in Startups is $390crore, which is quite big amount.
Chinese big shots Alibaba & Tencent has invested heavy amount in Flipkart, Paytm, Ola etc.
Vivo , Oppo , Xiomi is also going to invest in India.

For any business finance is the lifeline
Now just imagine, 95% of Indian startups are failing even in normal situation but few who are surviving on financial support will be in the big trouble
Startups shows the power of entrepreneurship, I hope government will take an initiative to revive the Startups in future but, the upcoming period will be not easy for Startups. So this roller coaster ride will continue ,Hope for the Best !!!


Prathamesh
25 April 2020



Sources
1.Yadnya Investment Academy Youtube Channel – HDFC & PBoC 12 April 2020
2. https://www.loksatta.com/anvyartha-news/central-government-made-some-changes-on-fdi-policy-zws-70-2136469/

Comments

Dhanashree B said…
Very apt. This is one of the major issues government should be looking at.
April 25, 2020 at 8:01 PM
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