Flipkart to Oyo, top 4 unicorns account for half of combined valuation

Indian unicorns notch up valuation of $128.9 bn in 2020; several looking at IPOs

Indian unicorns rustled up a combined valuation of $128.9 billion in 2020 with 11 new players joining the exclusive club last year, according to a report by BofA Global Research.

It’s an impressive figure given that Reliance, the country’s largest company in terms of market cap, is pegged at around $181 billion and the second largest, Tata Consultancy Services, is $165 billion.

Unicorns are companies that have a valuation of $1 billion and above based on their last round of fund-raising.

What is also interesting is that the top four unicorns — Flipkart, Paytm, Byju’s, and Oyo — which are also known as decacorns (a company that’s valued at $10 billion and above) together have a valuation of $62 billion. A useful point of comparison is that IT giant Infosys has a market cap of $79 billion. Paytm’s valuation at $16 billion is currently nearly half of the market cap of software major Wipro ($35 billion) while that of Byju and Oyo is around a third.  

Thanks to the huge numbers who joined the unicorn list, India widened its lead with some of its competitor countries and was at number 3 rank (behind the US and China) in terms of the number of unicorns. 

The gap between India and the UK, for instance, has widened. India had 26 unicorns in 2019 and in 2020 it had 37 unicorns. In the same period, the number of unicorns in the UK went up only from 21 to 24.  In Germany, the unicorn count went up from 11 to 12 in the same year. India is also far ahead of some other countries in overall rankings for last year such as South Korea (11 ), Brazil and Israel (8 each), France (7) and Switzerland (5). 

The sectors that have attracted the maximum share of the overall valuation amongst unicorns are e-commerce and financial technology. They account for nearly half of the total unicorn valuation.

There are five e-commerce unicorns which account for 25 per cent of the total valuation of unicorns. Seven financial technology unicorns account for 24 per cent of the total valuation.

Education technology or edtech is also a sector that’s been gaining traction of late, especially with the rise of Byju’s. Two edtech companies account for 10 per cent of the combined unicorn valuation.

These are followed by software as a service and technical platforms which account for 8 per cent share of the total valuation. This is expected to rise to become a $3.5 billion market, growing at over 30 per cent because of its growing adoption by various sectors such as BFSI, healthcare, and education. The other key areas include food technology (6 per cent share) and transportation (6 per cent).

The data revolution which took off after the launch of Reliance Jio in September 2016 seems to have given a huge impetus to the number of unicorns. The total incremental increase in the number of unicorns between 2011 and 2017 was only seven. But from 2018 to 2020, as many as 29 unicorns have been added to the list. 

What is interesting is that despite getting funds from top investors - SoftBank, the Ant Group, Tencent, Prosus, Google - most of them are in the red and many say that the valuations do not reflect their true value. Consequently, IPOs or exit routes have been far and few.

Nonetheless, some eight to seven of them are now looking at going for an IPO sometime this year or next year. They include Flipkart, Nykaa, Zomato, Paytm, Grofers, and Delhivery. 

The large losses have been a dampener for exits, apart from the big Flipkart acquisition of Walmart. But now Big Basket, with a valuation of $1.2 billion, is in talks with the Tatas for a strategic acquisition.

Listed internet companies such as Info Edge, MakeMyTrip, Just Dial, Matrimony.com, Affle or IndiaMart, however, have been doing pretty well in the market.

According to the BofA report, their aggregate market cap has more than doubled from under $8 billion in August 2019 to $18 billion in January 2021. They have also outperformed the Sensex in the same period.

Info Edge, which owns Naukri.com among others, has already hit a market cap of $9.5 billion and sits on the top of the table.