Internet stocks in India

By : |May 18, 1999 0

IT stocks, especially the software stocks, are riding high
these days. Thanks to Infosys, HCL, Wipro, and the like who have climbed dizzying heights.
This is quite in line with the trend US stock markets witnessed a couple of years back-an
absolute craze for "IT stocks".

Now, Wall Street has a new obsession-Internet stocks. The
question is will this also follow suit? Will Internet stocks take off in India?

Blessings…
The Internet is a global medium. Its geography-independent nature will help companies make
an impact in global market without spending too much.

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The entry of private ISPs and improved telecom
infrastructure have set the stage for Indian companies to make a global impact using the
Net.

Indian stock analysts are also geared up for the Internet
stocks. They believe when RBI makes credit card transactions on the Net valid, Internet
stocks will take off.

…and bottlenecks
On the flip side, there are stringent market-entry rules of SEBI (Securities and Exchange
Board of India)-the company has to be profit-making before it aspires to go public. Also,
the minimum size of the public issue has to be Rs 10 crore in order to be listed on
National Stock Exchange and Bombay Stock Exchange.

Sure, the rules aim at an early break even. But the
Internet is a different ball game. Here the "first movers" claim a major pie of
marketshare as well as mindshare. To be successful you have to think big, not necessarily
earn big.

A living example
The Amazon case is a classic example to drive home the point. Amazon.com, the biggest
online book store, is riding high on the stock listings and has suffered a loss of $36.4
million in the first quarter of 1999-triple the loss it suffered in 1998′ first quarter.

The company doesn’t even look at turning profit next year.
But the company is riding high on the US stock listings. The question is how?

US market analysts say that the trend in Internet stocks is
"go for growth, never mind profits". And Amazon has been growing all these
years-its revenues increased to $294 million from $87 million. A 237 percent growth is
almost incredible.

The success mantra here is innovation. Be innovative, grab
the market share and you become a success story.

A million dollar question
To make Internet stocks a success in the country we will have to forget profits for a
while and concentrate on marketshare and mindshare. SEBI will have to oblige us by
relaxing its IPO (Initial Public Offerings) rules?

Will SEBI oblige investors by relaxing its IPO
rules? Tell us your answer to this million-dollar question by sending mail to content@ciol.com

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