Employees at a firm in Bangalore
Employees at a company in Bangalore [Representation Image]Reuters

Startups like Zomato, TinyOwl and Housing.com, which attracted funds worth billions of dollars over the past few years, have recently started laying off employees in significant numbers, underlining the fund-raising problems in the country's fast-growing e-commerce sector.

Earlier this month, the Mumbai-based online food-ordering startup TinyOwl laid off 112 employees in just three months after cutting 160 jobs in September.

Similarly, real estate services portal Housing.com was reported to have fired 200 jobs this month in a fresh round of layoffs amid growing pressure to meet the cost reduction targets set by its stakeholders. In its previous round of restructuring, the company had fired 600 employees.

While the layoffs have so far been confined to the hyperlocal, food ordering and classifieds segments in the e-commerce space, analysts warn that more startups may cut jobs in the coming months as they find it difficult to raise funds if the US central bank begins to increase interest rates in December.

"You will see a lot of these startups falling by the wayside once the US Federal Reserve starts raising rates and funding dries up," NDTV Profit quoted Paras Adenwala, investment consultant at Capital Portfolio Advisors, as saying.

During the global financial crisis of 2008, the US central bank had cut interest rates to near zero to boost investment and generate employment, and since then they have remained there. The loose monetary policy maintained by the US has also helped startups in emerging markets like India attract funds from abroad.

But growing expectations over a rate hike in the US next month is making foreign investors seek safe-haven investments like US bonds. Overseas investors have already pulled out a lot of funds from the Indian stock markets.

If a rate hike materialises in the US, many startups may struggle to attract funds, as they have already been criticised for excessive valuations and spiraling losses. Most of the e-commerce firms have never reported profits, as they give huge discounts to increase sales and push up their valuations.

The skyrocketing valuations of e-commerce firms have made many industry watchers equate the exponential growth of these firms with the dotcom bubble witnessed during in 1997-2000.

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