Catching the spotlight: 5 emerging businesses

Investors are always looking to invest in the next big thing or an investment that excites them. The problems generally are:

• These businesses are private companies and so are not open to the entire investing community

• With more than 5,000 listed companies, finding out the interesting businesses can be challenging

But what if we said that you can:

• Participate in the hottest new trend of 2024 - AI

• Make money by investing in companies that develop video games

• Invest in companies that make your science fiction dreams come true!

In this article, we look at 5 innovative businesses that are listed on the Indian markets.

A key part of successful investing is understanding the business model of your potential investment. What makes the business click and where are the potential pitfalls? With that in mind, we hope this list is of some help to you.

E2E Networks Ltd

You must have wondered how ChatGPT quickly responds to every query like an expert. Well, Nvidia’s chips are the brainchild of your favourite AI technologies.

Now if any company in India wants to build such capabilities using Nvidia’s GPUs - E2E Networks is the go-to place. Even infrastructure giant L&T has invested ₹1,407.0 cr for a ~21% stake in this company.

What makes it different?

The company provides scalable, accessible, and affordable AI/ML cloud platforms. These are essential for developers, data scientists, startups, and government bodies. Interestingly, E2E became the first company to bring Nvidia’s H200 GPU chips to India. This helped them in providing various AI and data centre-related services providing a potential moat for the company.

E2E’s summary financials

Source: Screener

Other market-related information

Source: Screener, Moneycontrol; data as of December 18, 2024

Key risk

Emerging technology companies need to continuously innovate and maintain their pace of product launches to compete efficiently. This could entail consistent capex, which could weigh on cash flows.

Nazara Technologies

We all love video games. What if you could not only play these games but also invest in a company that is making some of your favourite games? That’s what Nazara Technologies does.

What makes it different?

Nazara is a gaming conglomerate and is responsible for games like Classic Rummy and PokerBaazi. It has scaled its business with an acquisition strategy (acquired multiple high-growth companies) and nurtured its talent and technology to develop fascinating games.

Nazara’s summary financials

Source: Screener

Other market-related information

Source: Screener, Moneycontrol; data as of December 18, 2024

Key risk

Besides the need to consistently innovate, a key risk with Nazara is M&A risk. If acquired companies don’t scale up to expectations, it could hurt performance and disappoint the investors. Importantly the company has also been raising funds for these acquisitions which presents a risk of equity dilution.

Genesys International Corporation

Whether it's exploring new places or heading to older ones, your ride has been incomplete without your guide i.e. Google Maps. Now here is the Indian company that does something very similar. Its business segments can broadly be broken down into:

• Data as a Service (DaaS): Providing location data as services.

• Platform as a Service (PaaS): Providing mapping platform as services

• Software as a Service (SaaS): Providing mapping and location software as services to further leverage this data into other areas.

What makes it different?

The Geospatial Policy of 2021 allows only Indian companies to collect, prepare, store and disseminate granular geospatial data (data about a geographic location) and maps within India. This gives them an edge over foreign competitors like Google. Fast forward to 2024, demand for Genesys’ growth is evident from its order book ₹541.6 crore, 2.72x of FY24’s revenue. Here are some key places where its services are critical:

• GPS-based toll collection method

• Digital India Land Records Modernisation Programme

• Other digital initiatives in drones, automobiles, and mapping of infrastructure projects etc.

Genesys’ summary financials

Source: Screener

Other market-related information

Source: Screener, Moneycontrol; data as of December 18, 2024

Key risk

Genesys International relies heavily on government regulations and customers for its business.

Inox India Ltd

Remember those movies, where characters are frozen for years and then brought back to life after centuries? Yes, that’s cryogenics.

We are of course oversimplifying a very complicated subject, but the point is that this company is involved in the transportation and storage of liquid in cryogenic conditions.

What makes it different?

They are one of the largest manufacturers of cryogenic equipment, designed for the storage, distribution, and transfer of cryogens across temperature ranges, from 2~200 degree Kelvin. With over three decades of experience, they have engineering expertise, which has helped them build a comprehensive product portfolio.

Currently, cryogenics is only about 7% of its overall revenue, but the company has huge plans. Per management guidance, they expect to achieve 25% revenue growth by FY25.

Inox India’s summary financials

Source: Screener

Other market-related information:

Source: Screener, Moneycontrol; data as of December 18, 2024

Key risk

One of the biggest risks for the company is ensuring a strong order book for its existing products. The company will not just have to tap domestic and international markets to ensure sustained growth.

Authum Investment & Infrastructure

Turnaround investing! It’s like sitting in the rocket before launch. Read more about them in The comeback stories. Regardless of the business, successful turnarounds have created wealth for shareholders. But it's not a cakewalk, these opportunities need to be carefully analysed just like a smart fund manager because of the high risk it involves.

Now here is the company that does that - Autumn Investment & Infrastructure.

What makes it different?

It is getting into the business of investing in turnaround assets through asset reconstruction business. It also plans to build NBFC, AMC, and advisory for credit business. It eventually aims to build a full suite of financial services. The said business expansion will be funded through internal accrual and equity fundraising, although it is unlikely to take on debt.

Authum’s summary financials

Source: Screener

Other market-related information:

Source: Screener, Moneycontrol; data as of December 18, 2024

Key risk

The current business is dependent on equity investments which cater to more than 90% of the revenue..

What does it mean for you?

Reiterating here, these are not investment recommendations. While these emerging businesses may seem exciting, profitability and cash flow metrics for these companies might give investors pause. Just like any other investment, one should rigorously analyse these opportunities before making a decisions. On a more encouraging note, emerging businesses also command attractive valuations given that they represent technologies or products which have a strong future outlook.