All the world's a stage for unicorns

There seems to be a bit of China in most of the Indian start-up stories playing out now. Funding from Chinese companies has come along with several rounds of investments from so many other countries, including the US, Japan, UK and Singapore. In 2021, when the buzz is around start-ups going for IPOs and celebration of Indian entrepreneurship, it’s also time to acknowledge the role of global players in the journey to stardom.

At the centre of it all are some prominent start-ups launched by some dozen entrepreneurs about a decade or so ago. What binds them together are multiple rounds of funding spread over years, consistent loss-making spree failing to break their spirit, galloping valuations and now the race to get listed in stock markets while giving  profitability or at least break-even a shot.

Behind the making of unicorns and decacorns at a fast clip are foreign investors ranging from America’s Tiger Global to China’s Alibaba and Japan’s SoftBank to Singapore’s Temasek. Of course, many of them have been long-term lead investors, subsequently controlling the businesses founded by 20-something Indian entrepreneurs, who did not go the bootstrapping way. As some of the prominent start-ups go for IPO, all eyes are on the foreign investors who could shed their stake in the process.

Let’s first look at the payments-to-online marketplace company Paytm, which is going for a mega IPO later this year. China’s Ant Financial-backed group is planning a $3-billion IPO (the biggest in India so far) that is expected to take its valuation to a dizzying $25 billion to $30 billion. Last year, the company was valued at $16 billion while raising funds and is currently pegged at around $20 billion. The chatter close to the Vijay Shekhar Sharma-run company is that none of the foreign investors, including SoftBank, Alibaba Group’s Ant Financial and Elevation Capital (earlier SAIF Partners) wants to dilute stake and would like to stay invested. But industry watchers argue everyone wants a good exit.  

The eight-member board of directors of One97, the holding company of Paytm, recently approved the move to go for an IPO. Besides representatives of SoftBank and Alibaba, Mark Schwartz, vice chairman of Goldman Sachs Group and chairman of Goldman Sachs in Asia Pacific, is a board member. He played a major role in helping Alibaba founder Jack Ma with Alibaba’s $25-billion IPO in New York in 2014, according to the official website. A board like this is certain to have discussed how much Alibaba (with close to a 30 per cent stake) and SoftBank (with almost 20 per cent) would divest.     

Another mega IPO that’s coming up by early 2022 is that of Bengaluru-based Flipkart, now majority-owned by Walmart. If Paytm is planning an India listing or maybe a combination of India and overseas, Flipkart is looking at the US or Singapore. Flipkart’s IPO size is not known but could possibly be bigger than Paytm’s. In terms of valuation, the firm that was founded by Sachin Bansal and Binny Bansal is now pegged at around $35 billion to $40 billion. Its expected valuation at IPO is a mindblowing $45 billion to $50 billion.

Even for this e-commerce poster boy success story, marquee foreign investors have played a critical role since Flipkart was set up in 2007. While SoftBank made an exit when Walmart was acquiring Flipkart in 2018, its existing investors include Tiger Global, DST Global and ICONIQ Capital. China-based Tencent too invested in Flipkart last year and holds a minority stake in the company.     
    
Another start-up lined up for an IPO is food aggregator platform Zomato. In fact, it has already filed the red herring prospectus and is expected to hit the markets first among the string of start-ups going for IPOs. Founded in 2008 by Deepinder Goyal and Pankaj Chaddah (not with the company any longer), Zomato is looking at a $1.1 billion IPO. Valued at around $5.4 billion, the expected valuation at IPO is around $6.4 billion. Its investors include Info Edge, Tiger Global, Kora, Fidelity, Bow Wave and Dragoneer. It has raised funds from Chinese companies Ant Financial and Shunwei Capital as well.

Similarly, online grocery delivery platform BigBasket, founded in 2011 by five entrepreneurs and led by Hari Menon, has attracted investments from foreign firms, including China’s Alibaba in multiple rounds. Recently, the company was majority acquired by the Tata Group. Its valuation is estimated at around $1.8 billion. Menon had said last year that BigBasket aims to go public in the coming years, without giving a timeframe.

Hospitality group Oyo Hotels, founded in 2012 by Ritesh Agarwal, too has witnessed a jump in valuation over the years. Although the company is experiencing a major slowdown during the pandemic, its valuation is pegged at $9 billion at the time of a fund-raise recently. Its investors include SoftBank, Sequoia, Airbnb and Lightspeed. China’s Didi Chuxing and China Lodging Group too have backed the company, which is also expected to go for an IPO soon.

There are others waiting to list as soon as the pandemic cloud lifts. Byju’s, Delhivery, Freshworks, Nykaa and Policybazaar are just some of them. In the midst of this global potpourri, does it matter whether a start-up is listing in India or overseas?  





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