Low Valuations of Sify and Rediff – Why?

It is a reflection of the slow growth of the Indian Internet that the two companies which had listed on Nasdaq nearly 8-9 years ago today trade at very low valuations. Excluding the cash they have on their books, Sify and Rediff are trading at about $50-60 million valuation each. Both companies have a significant customer base (Sify in enterprises, and Rediff on the consumer side), and yet investor are putting a very low value on both of them. Part of the story can be the general market fall, but there has to be more.

I think that both companies have not exploited their early market leadership to create dominant and defensible positions in the Indian market. Sify faces competition in the enterprise market from the telcos (wireline and wireless) who have immense scale of operations. Rediff has not been able to position itself as the gateway to the Indian Internet, and is facing a rapidly growing Google that is capturing ad revenues with its performance-based model.

The Indian Internet story is not over by any means. There are others like Naukri who have now become the domiant players in terms of market cap. Given the market downturn and the cash crunch that companies are likely to face, I think we can expect to see some consolidation in this space so we get larger companies with $100 million in revenue. All the incumbents have plenty of cash to make some bold moves in this sector. And make the right investments in services to make the Internet a utility in our daily lives.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.