More tech in Top 50: Deepak Shenoy sees Zomato's Sensex entry as start of market makeover
As food delivery giant Zomato replaces JSW Steel in India's blue-chip index, tech-enabled businesses are poised to reshape the country's corporate elite, says Capitalmind's Deepak Shenoy.
In a telling shift that captures India's economic metamorphosis, Zomato—the food delivery platform that has become a fixture of urban Indian life—is poised to replace JSW Steel in the Sensex, with whispers of a Nifty 50 inclusion following close behind.
This changing of the guard signals more than a routine index rebalancing—it heralds a fundamental shift in what constitutes corporate power in modern India, and highlights how digital platforms are displacing the industrial stalwarts that once embodied Indian enterprise.
"I think more tech-enabled [companies] are going to be in the top 50," observed Deepak Shenoy, Founder and CEO of Capitalmind, in conversation with YourStory's Founder and CEO Shradha Sharma. Yet unlike Silicon Valley's architects of innovation, India's digital revolutionaries are charting a different course.
"Zomato is a tech-enabled business," Shenoy elaborated. "Its business is food delivery and quick commerce. It is not really a tech company from the face of it because a tech company in general would be producing a product that is primarily technical, like Nvidia or Microsoft. What you sell is not tech, what you use is technology to sell the goods. It is a good thing and more and more such companies will come in."
This nuance is crucial. Even Reliance, the embodiment of old-economy might, now channels its ambitions through the digital arteries of Jio Platforms. The revolution, it seems, isn't about creating new technology but about reimagining how India does business.
The public markets are witnessing this shift in real-time. Swiggy leads 2024's global tech IPO calendar, joining other digital enterprises like Ola Electric and FirstCry in their public market debuts. In the same space, Zepto, another quick-commerce player, recently secured $350 million from domestic investors, led by Motilal Oswal.
"You are competing with companies in the public space that make aluminium and steel, they are very boring," Shenoy noted. "At least the likes of Zepto, Zomato and Swiggy come up with something more interesting to invest in. You can experience their story in real-time. How do we know who makes the best aluminium? Here you can see improvements tangibly, by providing better packaging material, better service, faster delivery etc."
Yet beneath this digital transformation lurk questions of sustainability. "I think competition is going to increase dramatically whether it is Reliance, Dmart or Aditya Birla," Shenoy cautioned. "As an investor, the story still has to evolve. You need to see these companies start giving meaningful profits at some point."
The narrative grows more complex in quick commerce, where India's foreign investment regulations—which have already entangled Walmart-owned Flipkart and Amazon in regulatory scrutiny—restrict inventory control. Shenoy points out that Zomato's foreign ownership structure has, thus far, kept inventory costs conveniently absent from its balance sheet.
"You over-order something and you under-order something else, you will have inventory holding costs. This is not visible on Zomato's balance sheet because they don't officially own any of these entities."
A closer examination reveals that Zomato's profitability draws heavily from investment income—its substantial cash reserves, exceeding Rs 10,000 crore before its Rs 2,048 crore acquisition of Paytm's events business Insider, have been deployed in fixed-income instruments. This financial engineering, while legitimate, raises questions about the underlying business model's strength.
From its Bengaluru headquarters, Capitalmind, a SEBI-registered portfolio manager with over Rs 2,300 crore asset under management, continues to analyse this shifting landscape. As India's corporate hierarchy undergoes this historic realignment, the question remains: Will this tech-enabled transformation deliver the sustained value creation that marked its industrial predecessors?
Edited by Jarshad NK