In its latest outlook on the ‘State of the Economy’, the Reserve Bank of India (RBI) has noted that “debut offerings by Indian unicorns” show that a “new era has clearly begun” that could make 2021 “India’s year of the initial public offering”.
The Zomato IPO earlier this year is said to have sparked feverish interest in Indian startups and the central bank has noted that more are in the pipeline “as bullishness about India mounts, especially around Indian tech”. Here’s all you need to know about unicorns and how India is among the world leaders in this area.
What Is A Unicorn?
The term ‘unicorn’ is used to describe any privately held company that has touched a valuation of more than $1 billion. The word is associated most closely with the world of startups — new entities that are focused on proposing innovative solutions and concepts that can sometimes create an entirely new business model, think ride-hailing service Uber or lodging and boarding aggregator Airbnb. But even the likes of McDonald’s and Ford Motors began as startups.
To be called a startup according to the current convention, an entity needs to have come up with a novel proposal that has the potential to disrupt the existing market and open up new dimensions for driving uptake.
“Startups are rooted in innovation, addressing the deficiencies of existing products or creating entirely new categories of goods and services, thereby disrupting entrenched ways of thinking and doing business for entire industries,” says an article in the Forbes magazine.
After putting together what it proposes as its winning idea, a startup seeks to raise money from financiers to upscale the idea and create its business model. A startup that manages it to raise $1 billion or more is known as a unicorn. But a startup remains a unicorn till the time it issues its IPO. A startup that goes public no longer gets the unicorn tag.
US-based venture capitalist Aileen Lee is said to have popularised the term ‘unicorn’ in reference to startups, saying that only a small fraction of startups actually hit valuations of $1 billion or more. Such startups were so rare, Lee said, that they are like the mythical unicorn.
How Many Unicorns Does India Have?
The RBI in its August 2021 bulletin said “it is estimated that India has 100 unicorns, with 10 new ones created in 2019, 13 in 2020 in spite of the pandemic and 3 a month in 2021 so far”. Swiss-based investment bank Credit Suisse said that “against 336 listed companies with a ~$1 billion market capitalisation, there are now 100 unicorns in India with a combined market capitalisation of $240 billion”.
Reports say that India is now third in the global list of countries with the highest number of unicorns, behind only the US and China. Credit Suisse said that “FinTechs, including e-commerce, have been leaders in the Indian unicorn landscape” and make up about 30 per cent of the value of the Indian unicorn ecosystem.
But Indian starups in sectors like education technology, food delivery, and mobility, too, have gone unicorn, like Byju, Ola, etc and Credit Suisse notes a “rapidly growing number of firms in industries such as Software-as-a-Service (SaaS), gaming, new-age distribution and logistics, modern trade, biotech, and pharmaceuticals”.
What Are The Reasons For RBI’s Optimism?
Reports say that led by the Zomato IPO in July this year, investments through IPOs so far in 2021 now touch $8.8 billion and already exceeds what it had been in the three years past.
The big IPOs lined up this year are said to be of payments service provide PayTM, hotel booking app Oyo, edtech startup Byju’s, etc. Cosmetics company Nykaa, too, is said to be working on a share offering.
RBI said that “debut offerings by Indian unicorns… have set domestic stock markets on fire and global investors in a frenzy”.
“India’s tech boom has been long awaited, with strong global and domestic appetite for what are widely believed to be world class businesses in the pipeline, notwithstanding initial losses that have largely stemmed from the deep discount business models adopted by them,” RBI said.
Underlining how startups represent a new approach to business and investments, the central bank said they rely on talent and innovative ideas to break forth and do not count on “inherited wealth or depend on bank loans or extra-business connections”. “These are the children of liberalisation, not of the wealthy,” RBI noted.
The ability to disrupt a certain market or business model being a key USP for startups, RBI said that investors “regard them as ‘concept stocks’ because they flout the existing conventions — they have neither made profits nor issued any guidance on ever getting to profitability”. While it noted that the “bursting of the dotcom bubble in 2001 showed that many start-ups could go bust… those that survive can go on to become the Googles, Facebooks and Amazons of the future”.
The Centre — which launched the Startup India scheme in 2016 as a “flagship initiative… to build a strong ecosystem for nurturing innovation and startups in the country — told Parliament in July this year that the Indian startup ecosystem is “widely recognized as the third largest startup ecosystem” with more than 52,000 entities recognised as startups by the Department for Promotion of Industry and Internal Trade (DPIIT).
News18
____________
0 facebook:
Post a Comment