Beware the growth traps: Is the business model of digital technology companies in emerging markets sustainable?

Throwing caution to the wind

In 2020, one group of companies has done particularly well: the popular digital technology companies focused on e-commerce, delivery and entertainment, to name a few industries.

In emerging markets, they dominate the Chinese market; but they can also be found in Korea, Southeast Asia, Eastern Europe and Latin America. These have performed well and, at least on paper, should have the prerequisite to generate strong returns and free cash flow, given their often high gross margins, negative working capital profiles and asset light nature. The potential for these companies in the future is not to be disputed. However, cautiousness should be engaged on most of these projections. UTI International CEO: India's secular growth phase to last for next decade In t...