Angel investor T.V. Mohandas Pai, co-founder of Aarin Capital and chief advisor to Manipal Education and Medical Group, feels that valuations in the Indian start-up and e-commerce sector were totally unrealistic and were inflated and that is the basis on which funds came into the companies. The former Infosys CFO feels a correction is going on and henceforth companies will focus on profitability and not just growth. Excerpts from an interview with Arindam Mukherjee:
Why is there such a downturn in the start-up and e-commerce sectors in India?
It is a cyclical development and will turn around at some point of time. Valuation goes ahead of value creation and then funding slows down and then again value creation and profitability is looked at. It moves in cycles. You must see that in the last 2-3 years huge money came in as people threw money looking at the high valuations. There was no due diligence about the strength of a company and its profitability path.