Soaring Start-Up Valuations, Rising Questions

Indian start-ups are flush with funds. In fact, 2021 has seen the fastest-ever addition of 15 start-ups to the billion-dollar club, some at eyebrow-raising valuations. But will the hype sustain?

- Rukmini Rao

On June 25, listed diagnostics chain Thyrocare announced the sale of 66.14 per cent stake to API Holdings, the parent company of online pharmacy PharmEasy, for ₹4,546 crore, in the first-ever acquisition of a publicly listed company by an Indian unicorn. PharmEasy is the first unicorn in the pharmacy space earlier this year. The deal also triggered an open offer for the purchase of an additional 26 per cent stake at ₹ 1,300 a piece, a discount of 10 per cent to Thyrocare’s closing share price on the same day. The total deal value, including the open offer, is pegged at over a billion dollars. Thyrocare’s shares, however, fell 10 per cent intra-day on June 28 due to the discounted open offer.

Market watchers say the deal is the beginning of hectic activities in the start-up world, with many more companies likely to announce IPOs later this year.

In fact, the déjà vu moment for Indian start-ups began a few months ago. In the second week of April, six companies, including PharmEasy, Meesho, CRED and ShareChat, announced new rounds of funding of over $1.5 billion, and turned unicorns, that too within a week. India has already seen 15 unicorns in the first six months of 2021 itself. With liquidity increasing, private equity funds raised $188 billion in Q1 2021 (January-March), against $163 billion in Q1 2020, according to a report by Prequin, which provides data on alternative assets.

Though some like Zomato, InMobi and Paytm have already announced their roadmaps for IPOs, the WeWork listing debacle in the US two years ago raises a red flag. Within one month of announcing its IPO in August 2019, the co-working company reduced its valuation from $47 billion to nearly $10 billion and deferred the listing indefinitely.