According to BofA Securities, the Covid-19 pandemic may have propelled India’s internet sector into a phase of hypergrowth that will result in staggering value creation in the next 10 years.
The brokerage firm considers Indian internet sector to be at an inflection point to witness hyper-growth in the coming years as tech companies steadily disrupting the traditional services by eliminating middle men, delivering faster, cheaper and more convenient products and services. For this, BofA credits the rollout of 4G telecom services by Reliance Industries in 2017 for the mass adoption of the internet in India, and believes Covid-19 has accelerated the path towards profitability. In addition, it said that this growth is ensured by a supportive government, tech-savvy young population given more than 60 per cent of Indians are aged below 35 years, ongoing digitisation of small businesses and a well-funded private equity ecosystem.
BofA Securities believes Reliance Industries remains the best play on the internet ecosystem as it will garner over 500 million users over the next 3-5 years, offer broadband services to 20-25 million households and cater to 12-15 million small businesses. Further, it added that start-ups in India are moving beyond the top 100 million consumers, and focusing on the next 100-250 million consumers to gain traction. BofA Securities said that as the country’s GDP per capita improves, a large part of this ‘India 2’ market will move into the top tier of consumers.
BofA expects digital revenues from online, advertising, shopping and subscriptions to pick up, over the next two years. Further, BofA expects Indian fintech companies to take a more combative approach in the next 3-5 years. It added that in the coming years, bigger technology companies would look to acquire companies having complementary offerings.
