What portion of your salary should you spend on loan EMIs?
Most people buy a house or a car by taking a loan from the bank, but do you know what is the maximum portion of your salary that you should spend on EMI? What is the 40 percent EMI rule? What are the disadvantages of spending more on EMIs? Among home loan, personal loan, auto loan and credit card bills, which loan should you eliminate first?
India’s internet sector is set to witness hyper-growth in the coming years as tech companies steadily disrupting the traditional services by eliminating “middlemen”, delivering faster, cheaper and more convenient products and services, according to BofA Securities.
In a report on January 13, the global financial services firm said that a supportive government, tech-savvy young population, given more than 60% of India’s population are less than 35 years, ongoing digitisation of small and medium-sized enterprises and a well-funded PE/VC ecosystem, suggest that the stars are aligned to create investor value in the next 10 years.
Bofa Securities highlighted that the launch of Jio is a ‘game-changer’ for the sector as it helped increase usage and affordability with the mass adoption of internet users.
The country now has over 650 million internet users, each consuming 12GB data per month at an ARPU (average revenue per user) of $2 per month.
Of late, the stringent lockdown in India due to Covid-19 helped in a paradigm shift in consumption to online especially in sectors like ecommerce, edtech, fintech and gaming.
BofA Securities added that the pandemic also gave push to SMEs towards digitalisation. More importantly, it helped the tech companies structurally bring down costs by 25-35% on an average.
“Even post-Covid, marketing expenses or discounts are unlikely to go back to original levels given the customer pull. We hence believe Covid has accelerated the path towards profitability and expect potentially IPOs in the sector in the next 2-3 years,” the brokerage said, adding companies like Zomato, PolicyBazaar, and Delhivery have been vocal in media talking about looking to IPO in coming years. Even RIL has publically indicated it plans to list Jio and Retail within 3-4 years.
Listed internet companies including Info Edge, Affle India, Matrimony.com and IndiaMART InterMESH have already rallied over 200% amid the ongoing rally on Dalal Street since March lows.
On January 14, the price-to-earnings ratio of companies like Info Edge was hovering at around 255 times against its long-term average of 66 times. On the other hand, the ratio for IndiaMART InterMEST was at 93 times against its long-term average of 53.
Commenting on the rich valuations, BofA Securities said, “Current listed tech companies which have good governance like InfoEdge, IndiaMart, etc are trading at rich multiples. This is on the back of scarcity premium which these companies have given the huge demand and lack of alternatives. Of late, the regulator has also eased the listing regulations-to encourage tech companies to list in India vs aboard.”