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National Startup Advisory Council Reconstituted – Implications for Investors Explained

Analysis of Reconstitution of National Startup Advisory Council and Impact on Industries and Investors

Analysis for Layman:

The Indian government has reconstituted the National Startup Advisory Council (NSAC) by nominating 31 new non-official members. The NSAC advises the government on policies and initiatives needed to promote startups and innovation in India.

Some key points:

  • New members like Abhiraj Singh Bhal (Urban Company) and Kunal Bahl (Snapdeal) have been added. They bring valuable experience in building startups.
  • The tenure is 2 years. After that new members may be nominated.
  • The NSAC was first set up in January 2020. This signals the government’s continued focus to support startups.

For general citizens, a strong startup ecosystem creates more employment and innovation opportunities. The government aims to make India a global startup hub. The NSAC guides policies and programs for funding, incubation, tax incentives, and reducing regulatory hurdles. A vibrant startup culture stimulates economic growth too.

However, executing the NSAC’s vision requires coordinated efforts between central and state governments. Success depends on translating policy advice into ground implementation efficiently. Proper monitoring mechanisms are needed to track progress on long-term objectives.

National Startup Advisory Council Reconstituted - Implications for Investors Explained

Impact on Retail Investors:

The reconstitution of the NSAC is a positive signal for retail investors looking to invest in the high-growth Indian startup segment. A supportive government policy environment will directly benefit key listed startups like Zomato, Nykaa, PB Fintech etc. It will also strengthen the venture capital industry which funds startups.

Listed startups in food delivery (Zomato), e-commerce (Nykaa), fintech (PB Fintech) and emerging sectors can see faster growth and investment inflows with a robust NSAC policy vision. As their businesses expand, stock prices will be positively impacted over 1-2 years. However, most of these are currently loss-making, so profitability improvement is crucial.

The NSAC may also provide inputs to improve the regulatory landscape for listing startups. This can boost IPO pipeline of startups. For retail investors, more listing options in fast-growing startups allow them to diversify the portfolio.

Venture capital funds like India Quotient, Blume Ventures etc. which nurture startups across early to growth stage can benefit. As their portfolio startups attract higher funding, profitable exits, IPOs etc. the fund’s own valuations and performance would rise. This allows retail investors to earn superior returns by investing in such VC funds through alternate investment funds.

However, 90% startups fail due to lack of funds or market viability. So risk management is vital while investing. Retail investors should assess startup credentials, financials, business model viability carefully before investing rather than blindly following trends. The NSAC policy impacts will also realistically unfold over 3-5 years rather than immediately.

Impact on Industries:

Key industries positively impacted by a stronger Indian startup ecosystem guided by the NSAC would be:

Technology – Startups in fields like e-commerce, fintech, edtech, food delivery, logistics etc. which leverage technology will be major beneficiaries of supportive policies pertaining to funding, tax breaks, eased regulations etc. E.g. startups like Ola, Swiggy, Groww.

Healthcare – Policy initiatives around innovation sandboxes, easier IPR regimes, subsidies for research can provide a fillip to health-tech startups working on telemedicine, medical devices, diagnostics etc. E.g. startups: Pristyn Care, PharmEasy.

Financial Services – Enabling regulations around newer tech interventions in banking, insurance and online payment systems can facilitate fintech startups specializing in digital payments, online lending, robo-advisory and insurtech.

Education – Edtech startups delivering online tuition, test prep etc. can expand much faster with digital education getting policy thrust. E.g. Byju’s, Unacademy.

However, the positive impact will realistically unfold over a 5-10 years horizon rather than immediately. Proper coordination between central and state government bodies is crucial to translate the NSAC’s vision into actionable policies, programs, and incentives on the ground. Appointing the right execution machinery is equally important.

Long Term Benefits:

Reconstitution of NSAC underscores India’s long-term commitment to nurture 75,000 startups by 2027 with addition of 50 unicorns yearly. This will deliver massive economic benefits:

Job Creation – Indian startups already employ 8 lakh+ people. As the startup base expands over 5-10 years, high-quality jobs creation can realistically rise into tens of millions. This is essential for gainfully engaging India’s young workforce.

Global Footprint – An enabling policy environment for startups backed by large domestic market can drive Indian innovation and breeds multi-billion ventures. India can emerge among top 3 startup hubs globally in fields like fintech, edtech, health tech and enterprise software.

Innovation Capabilities – Startups push the boundaries of innovation serving previously under-served segments like rural, local language users etc. or pioneering new tech solutions. Concrete policy support and incentives to innovation will tremendously boost India’s research capabilities.

International Investments – Indian startups are already attracting record funding from global investors. As more mature unicorns emerge across sectors over 7-10 years, India can draw billions of dollars in FDI annually into the high-growth startup space.

Economic Multiplier – Growth of startups has a powerful multiplier effect on job creation, investments and consumption across interlinked sectors. It provides a launchpad for allied industries like IT, BFSI, logistics, retail etc. to expand in tandem over the long term.

However, the long-term gains will accrue only if the NSAC’s advice translates into effective policies and ground execution by both central and state agencies in a coordinated manner. Appointing the appropriate machinery to implement programs, monitor progress and iterate based on outcomes will be the key.

Short Term Benefits & Negatives:

Benefits:

Funding Momentum – Reconstitution signals the government’s unperturbed focus to strengthen innovation and startup ecosystem despite ongoing funding winter. This can bolster investor confidence to some extent and maintain startup funding momentum in 2023.

Policy Stability – Consistent efforts like NSAC reconstitution affirms India’s support towards startups policy will remain stable irrespective of political changes. This policy stability reduces regulatory uncertainty and risk for investors, entrepreneurs to make investment commitments.

Global Signal – Renewed thrust to enhance India’s standing as a top startup hub globally increases soft power and builds positive perception. High-quality entrepreneurial talent and foreign investors get reassured about India’s growing innovation credentials amidst global economic turmoil.

Negatives:

Execution Uncertainty – While vision setting through advisory panels is helpful, effective on-ground execution remains uncertain given coordination complexities between central and state agencies. This may temper short-term enthusiasm regarding tangible impact.

Funding Crunch – 2023 may see Indian startups struggling for funding as economic woes force venture capital funds to tighten purse strings. NSAC policies will take time to revive investor sentiment. Without capital supply, many startups may shutter impacting ecosystem growth.

Global Skepticism – Despite positive steps like NSAC reconstitution, India may continue to be seen as lagging countries like US, China in factors like research excellence, IP protection, technical talent availability that are imperative to nurture global scale startups over 3-5 years.

Thus effective translation of NSAC’s strategic vision into executable policy initiatives, decentralized implementation machinery and monitoring progress through right metrics is key to realize tangible short-term wins. Else it risks being a ceremonial committee with modest ground impact

Companies that may benefit:

  • Early-stage startups: Increased focus on fostering innovation and nurturing startups could benefit early-stage ventures through easier access to funding, mentoring, and incubation programs.
  • Companies in sectors targeted by government initiatives: If the reconstituted NSAC prioritizes specific sectors (e.g., cleantech, healthcare), companies operating in those fields could see increased interest from investors and potential collaborators.
  • Technology service providers: Increased startup activity could boost demand for services offered by companies like cloud computing providers, software developers, and digital marketing agencies.

Companies that may be challenged:

  • Established incumbents: Increased competition from innovative startups could disrupt traditional businesses in various sectors. This could lead to market share loss, pressure on margins, and a need for adaptation.
  • Companies reliant on government contracts: If the NSAC shifts focus away from existing government-backed initiatives, companies heavily reliant on such contracts could see their revenue streams impacted.

Global companies:

  • Venture capital firms and investors: Increased opportunities in the Indian startup ecosystem could attract global players looking for promising investment destinations.
  • Multinational corporations: Improved innovation within India could present potential collaboration opportunities for larger global companies seeking talent, partnerships, or market access.

Market sentiment:

The news of the reconstituted NSAC could initially generate positive sentiment in the Indian stock market, particularly for sectors linked to startups and technology. However, the longer-term impact would depend on the specific policies and initiatives implemented by the council and their actual effectiveness in boosting the startup ecosystem.

Disclaimer: Due to the limited information available, this analysis is purely speculative and should not be considered financial advice. Always conduct your own research and consult with a qualified financial professional before making any investment decisions.

Source: ET Bureau. “Govt Reconstitutes National Startup Advisory Council”. The Economic Times, 19 Dec, 2023.

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