Santosh N Talks About the Rise of Valuation in India

Santosh N, Senior Advisor in the Duff & Phelps Valuation Advisory Services practice, was recently featured in LiveMint, sharing his views on how Indian companies are burning cash to avert losses and gain market monopoly and why mergers and acquisitions (M&A) are better than initial public offerings in India.

Santosh commented: “In India, companies are in cash-burning stages in the hope that they will be able to drive out competition. Two or three strong companies would survive and make profits. That’s the hope driving valuations. There is an assumption regarding losses and if the losses are lower than that, then it’s seen in a very positive light. In business models that are still evolving in India (such as food delivery or ride sharing), there is no science to deriving valuations–it’s all about negotiations. Companies show they are becoming bigger than before and adding new service lines, hence needing cash to burn. Investors are pricing companies, not valuing them. Pricing is what one is willing to pay while valuation is about the inherent value of the business. M&A is the most preferred, particularly for those firms who are below the $10 billion valuation bracket. They can get acquired.”

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