Should we buy the shares of new-age tech companies?

The new-age tech companies who are making a big noise in society today are basically Door Delivery Companies (call them as ‘DDC’) or Education technology (ed-tech) or Financial Technology (FinTech) or Digital Brokers or Commission Agents (call them as ‘DBA’)

Is it a good idea to buy the shares of these companies for wealth creation?

I am not an expert; you can decide.

Let us take the example of Door Delivery Companies (DDC). In a city like Bangalore, you can find plenty of shops in the neighborhood. Every household owns vehicles, both 2 wheelers, and 4 wheelers. All or majority of the members in the family know driving.  Everyone has ample free time, atleast two hours per day and one full day during the weekend. (Let us not pretend to be busy all the time! There is nothing much that can be done in the city, going out for shopping is one of the time pass or pastime activity)

In spite of this, why are people ordering items from DDC? The probable reasons –

Only Senior Citizen Homes – In places like Jayanagar or Basavanagudi, most of the houses are having only senior citizens. Their children have settled abroad. To chat with the children or grandchildren, these seniors have become tech-savvy. So, they find it convenient to order food or essentials through DDC. Understandable.

But why Junior Citizens (?) order from DDC?

  • Maybe too lazy to go out; or
  • It is convenient to order from home
  • When fingers can do the job, why trouble the legs? (!)
  • Online ordering is cheaper (deals and discounts)
  • Have accumulated credit points and to use them, order online and this vicious cycle goes on and on!
  • Avoid long queues at billing counters (waiting is a pain)
  • Can get fresh fruits and vegetables, meat, etc. (Always? Oh really!)
  • Buying online has become a hobby? Habit? Or addiction?
  • Is physical shopping outdated?
  • Is going to shops below dignity? (Not suiting the status); Or
  • Blame ‘mother of all excuses’ – Corona?

I have seen in apartment complexes; people order from the restaurants or shops which are located within 100 meters! The inspiration for this article is ‘UPMA’! I happened to see that a healthy and fit family of 3 (husband, wife and son) have ordered Upma for breakfast from a nearby restaurant!

One of the advantages of living in an apartment complex is the safety it guarantees. Agreed? Today, that safety is compromised due to DDC. In a complex, if 100 houses are there, on average 50 strangers will get inside for Door Delivery of items! Once they enter, who knows where they will go and what they will do! People are crazy or lazy to even go by lifts, walk 20 steps up to the security room to collect the items! People don’t hesitate to order through DDC even at the cost of safety!

Thanks to this trend, hundreds of online DDC have come up.

The scene is no different in other sectors like Edtech or Fintech or DBA companies. All of them have more or less, similar contents, features or offerings. Each of them is claiming to have acquired a huge client or userbase. But for me, it’s like having 4 medical shops on the same street. Each one competes against the other and makes sure that none of them will make a decent living!

As the huge numbers are brewing, investors who have bags and bags of cheap money are pouring them into the ‘new age’ ideas. The backbone of the new age companies is Technology and hence Engineers. Thus, those who have passed the 12th standard in the supplementary exam are also getting admission in Engineering colleges, when they get into the 6th Sem, all or most of them are picked up by the companies, lock-stock, and barrel. Thus, the party is going on with high spirit.

Finally, answering the question – should we invest in the shares of these companies? What do you feel? Will this drama continue for another 10 years? If you foresee it will continue and more opportunities will emerge for new-age DDC or likes, please go ahead and buy their shares for wealth creation! If you doubt this model, then safely invest in traditional fundamentally strong companies.

Personally, I come from an old school of thought and still bet on fundamentally strong companies over others!

Good day.

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About B E Kumar Prasad

B E Kumar Prasad
He is a Practicing Chartered Accountant in Bengaluru, India. He has 25+ years of experience in income tax, business setup, and NRI matters. He is also an Insolvency Professional and Registered Valuer (F&SA).Prasad welcomes your comments and questions. Please email him at [email protected]

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