The Changing Dynamics


Decadal Changes 

There is a very famous quote describing the change. “Day by Day nothing changes, but when you look back everything is different”. The same is also happening in the listed / unlisted space that is currently today. While certain things look really similar, a lot has changed over the last decade. Let me highlight this with the below-mentioned example.

The table below contains the Market Cap of prominent companies ten years back and their market cap now.
The above-mentioned table is not to highlight the stellar returns or take the benefit of hindsight. It is to highlight one crucial factor: the Market Cap of these companies a decade back.
Things to note

– These good quality companies were available in the listed space at these valuations earlier.
– The average market cap of these listed small-cap companies was IN 444 crores.


– Companies at these valuations are typically raising series B to series C from VCs and PEs today.
– Companies remaining private for longer and returns being earned by private market participants
– We have more than 100 unicorns I.e. valuations upwards of 8000 crores in the private market.  
Meaning a great deal of good quality companies are not available to listed market investors which were available much earlier as per the above table
We can always debate the fact that when the VC / PE-backed companies list on the exchanges, the valuations are justified or not. But one thing is quite clear, the average market cap of companies being listed on the exchanges has gone up and will result in comparatively lower returns for listed participants

Even some of the latest examples in the Pre IPO Space Include.
To prove further, let us look into the market caps of the companies being listed in recent times
The above list is just to give a few examples of how large companies have become when they come to IPO.
Key Takeaways

– A clear structural change is visible because of private market participants (VC / PE Funds)
– To invest in companies at an early stage just like what was happening in the past decade (listed  
  small-cap investing), investors will have to look at investing through Angel / VC funds now

– Look at such investments as a part of overall equity allocations along with Large, Mid and Small-cap  
  equity investments, the key difference, in this case, will be liquidity

– Opportunities will remain time sensitive as such investments do not remain open year-round

Disclaimer: This note is not meant for any advisory purpose. This is meant for an introductory engagement with a distributor. This should not be used for investor interaction and should not lead to any influence on investors for any kind of investment decision based on this note. The distributor/investor must exercise independent due diligence for anything related to investment.

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