Are 'New Age' Valuations Really New? Mihir Vora And Samir Arora Weigh In
According to Vora, the real question is not whether valuations look high. It is whether they reflect genuine long-term growth.
Investment advisor Mihir Vora on Sunday flagged high churn in the Sensex to argue that “new age” companies and valuations are part of a long market cycle, not an anomaly. He pointed to a concern among investors over the risk in “new-age” companies and whether their valuations are too high.
In a post on X, Vora highlighted that this fear is not new. It has existed in every market cycle.
“For this, it is worth reminding ourselves that the process of “creative destruction” has always been an integral part of the market and economics. “New” technologies and businesses are always emerging and creating new OR disrupting existing businesses,” Vora, the Chief Investment Officer - TRUST Mutual Fund, said on X.
He reminded investors that this process has always reshaped markets. Vora pointed to the BSE Sensex of 1987. Of the 30 companies in the index then, 24 are no longer part of the Sensex. That is an 80% churn. Eight of those original companies no longer exist. They were merged, taken over, or went bankrupt, he explained.
“Any new tech or business model will feel “New Age” during the initial adoption phase and growth phase - the first two legs of the “S” curve. Then it becomes so common that we don’t even talk about it being anything ‘special’,” Vora said, adding that more than half the index weight now comes from sectors that were once considered “new.”
According to Vora, the real question is not whether valuations look high. It is whether they reflect genuine long-term growth or irrational euphoria as that’s where “wisdom, sanity checks need to be applied.”
Reacting to Vora’s post, ace investor Samir Arora agreed with the argument. He cited Bharti Airtel’s early years, noting that the company went public while still loss-making.
“Similar was the case of Bharti. The company was making losses when it IPO'd at around USD 1 billion mkt cap and investors would ask why we were investing in a loss making company….,” the Helios Capital Management founder said.
"And the funniest thing people do when the company just turns from loss to profit ( and therefore the profit may be (say) 5 paise ) to divide price by .05 and go all bonkers at the PE," he continued.
