25% of Indian startups in serious trouble if COVID-19 persists for long: Expert

PTI, May 10, 2020, 4:41 PM IST

Bengaluru: A quarter of India’s startups would be in serious trouble if adverse consequences of the COVID-19 pandemic persist for long, according to information technology industry veteran Senapathy (Kris) Gopalakrishnan.

“About 25 percent of the startups have less than six months of runway,” the co-founder of IT major Infosys Ltd, told P T I. “They will be in serious trouble if the recovery does not happen in six months, it does not look like (happening within that period).”

“I would say 25 percent of the startups will face serious challenges. If they are able to get additional investment, they will survive otherwise they will fail. Not all of them, some of them will fail,” said the former President of the Confederation of Indian Industry.

On the prospects of the remaining 75 percent of Indian startups, he said there would be more failures if the coronavirus-triggered crisis lasts longer.

“There will be more failures unless they get additional funding from existing investors or support from banks on working capital or support from government for some form of debt or grants. We will see more companies get hurt as this prolongs,” said the Chairman of early-stage startup accelerator and venture fund, Axilor Ventures.

The former CEO and Managing Director of Infosys Ltd, however, noted that the outlook for startups depends on the business segment they cater to.

“For example, e-commerce is starting to operate, some of the food delivery starting to happen. In the area of travel, mobility, for example, passengers are not taking shared ride or not using a taxi. The same vehicle can be used to deliver packages, food, and grocery. People will have to pivot,” Gopalakrishnan said.

Ankur Pahwa, Partner and National Leader E-Commerce and Consumer Internet, EY India, said start-ups in the mobility space will especially hope to quickly get back to normal although with more stringent hygiene measures in place, adding, some of the guidelines provide a tailwind to them.

B2C companies will have to wait for the demand to pick up under the discretionary spending, Pahwa said.

Demand for work-from-home category spends will pick-up considering this new normal is here to stay, according to him.

The demand generated by tier II and III cities will be key indicator of the consumer sentiment as many of the tier I cities continue to be under a mixed zone.

“Supply chain will continue to be a challenge albeit with reduced pressures considering relaxation, with start-ups keeping a keen eye on maintaining the balance between supply and demand,” Pahwa said.