Our world, in bits and bytes

Narrow based markets (tech, telecom, India)

I was looking at some data put together by IndiaNomics listing the top 50 IT companies in India and the top 30 Telecom companies.   It has some interesting implications for VC/PE investing here.  It is striking how quickly the value graph tapers down to $200M market cap.

• Telecom: The top four operators together account for 90% of market cap.  And this does not include Vodafone which rolls up into the global behemoth that it is.  Even “stars” like OnMobile ranked at 10th (an MVAS company) is valued at 1% of the market cap of Bharti.
• Info Tech: Similar story except the IT services firms dominate the head of the table. Educomp at $900M and in 9th place is less than 5% of Infosys’s revenues.

Of course similar tapers are seen in other markets but the distribution here indicates both a smaller and narrower market.   Building businesses to land up in the mid-caps where investors can exit is not easy ($300M market cap usually implies $300M in revenues and/or consistent $30M profit-after-tax in good markets).

India IT and Telecom Market Value Concentration

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