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BT MindRush: Retail investors losing money on over-valued start-ups is unfair, says Murthy

BT MindRush: Retail investors losing money on over-valued start-ups is unfair, says Murthy

Lack of proper market research mechanism in India is the key issue that is leading to improper valuation of companies, he says.

NR Narayana Murthy, Founder – Infosys, during the Business Today Mindrush 2022 on "Leadership in an Uncertain World" in New Delhi on 24 June, 2022. Photo by Hemant Rawat NR Narayana Murthy, Founder – Infosys, during the Business Today Mindrush 2022 on "Leadership in an Uncertain World" in New Delhi on 24 June, 2022. Photo by Hemant Rawat

Amid rapid fall in valuation of newly listed companies in the country, veteran entrepreneur and founder of IT major Infosys, N R Narayana Murthy pinned down the core issue that is causing the problem.

At the Business Today MindRush event, the senior industry leader said, retail investors losing money due to fall of valuation of the newly listed entities is unfair. 

"Out of the IPO investors, 20 per cent are in the retail category, who have put their hard-earned money. If poor people are losing their money then it's unfair. The main issue here is companies or entrepreneurs do not know that right size of their (target) market. This is due to faulty market research in the country that is causing the problem", he said.

According to him, over-estimation of their potential market size and future business, is the root of the problem. "Entrepreneurs need to under promise and over-deliver", said Narayana Murthy.

While the start-up industry was flooded with funds from venture capitalists till last year, getting funds for them is increasingly becoming difficult of late. To tide over the crisis, Murthy has a few tips to offer for the young entrepreneurs.

Figuring out the optimum price value proposition is important while devising their business strategy and presenting their plans to VCs for funding is crucial, he said. 

"You must hope and work for the best but be prepared for the worst", Narayana Murthy told entrepreneurs, who are aspiring to build business empires in the new, post-COVID world that has turned uncertain.

According to him, entrepreneurs need to keep their focus on the value addition that they offer through their ventures and keep sharpening it. Secondly, differentiating their business from the competition will be key to their success in these tough times.

Third, he says, leading by example through hard work, discipline, austerity measures and innovation is very important now. Focusing on work productivity at every level would help entrepreneurs overcome some of the most critical challenges. And finally, focusing on innovation so that they can offer better value for money on every aspect of their offerings would be required.

"Be smart. Think of long term in multiple short-term steps. Review them periodically, observe the competition, vendors and stakeholders and adopt quickly (to the caging environment)", he told the entrepreneurs.

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