Lessons from frugal businesses minting money in India
Indian startups have shed more than 30,000 jobs. Investors now worry that companies in their portfolio will never make money. Heavy losses by Indian “unicorns" (unlisted companies worth $1bn or more) bear this out.
According to Tracxn, a data firm, of the 83 that have filed financial results for 2022, 63 are in the red, collectively losing over $8bn. Yet some Indian tech firms manage to prosper. Rather than promise mythical future riches, they are practical and boring, but profitable.
Call them camels. Zerodha, a 13-year-old discount brokerage, clocked $830m in revenue and $350m in net profits in 2022. In 2021, the latest year for which data are available, Zoho, a Chennai-based business-software firm founded in the dotcom boom of the late 1990s, made a net $450m on sales of $840m.
Info Edge, a collection of online businesses that span hiring, marrying and property-buying, has been largely profitable throughout its 20-year existence. Their success is built on an idea that seems exotic to a generation of Indian founders pampered by indulgent investors: focus on paying customers while keeping a lid on costs. Consider revenue first.
Some founders privately grumble that getting the Indian user to pay for anything is hard. But Nithin Kamath, founder of Zerodha, disagrees. He believes that though the wallet size of Indian consumers is small, they are willing to pay for products that offer value.
Zerodha charges 200 rupees (around $2.50) to open a new account when most of its competitors do so for nothing. Mr Kamath believes that even this small amount forces the company to ensure that its users find its platform useful enough to pay that extra fee. India’s technology dromedaries are also ruthlessly capital-efficient.
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