India has a 100 unicorns -- a privately held startup company valued at over $1 billion -- a new report with unique methodology claims, more than double the 35-40 that most other reports and venture capitalists claim. The new report includes one unicorn firm each in cities-- Kanpur, Kochi, Nagpur, Thrissur and Trivandrum.

The new method by Credit Suisse has used one of the three criteria: 
  1. Either the company has raised funding at a $1-billion-plus valuation 
  2. It has reported an operating profit in FY20 which, at average valuation multiples of listed peers, would give them a $1-billion-plus valuation. 
  3. Or where a firm raised funding at less than unicorn value but the business momentum has improved, implying higher current valuation.

The report from Credit Suisse includes companies which are close to the unicorn mark but are not quite there yet, as well as sectors far away from technology including pharmaceuticals, gems and jewellery and manufacturing.

Unicorns are generally defined as technology startups which have attained the billion dollar valuation while still being privately held- generally within 10-12 years. In India, these typically include companies in sectors such as e-commerce, payments, ride-hailing, tech-enabled logistics, education and software-as-a-service (SaaS).

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The Credit Suisse report includes all these, and broadens its scope to companies including but not restricted to Parle Products, Vishal Mega Mart, Wonder Cement, ReNew Power Ventures, Serum Institute of India and National Stock Exchange.

The report says that it includes not only companies valued at over a billion dollar, but also companies whose FY20 earnings, at the average valuation of listed peers, would give them a valuation of over a billion dollar, and where its last funding round was at less than unicorn valuation, but business momentum has been strong since, implying higher valuations.

“We have spread our net wider, looking beyond the normal technology or ‘technology enabled’ sectors, which are expected to have unicorns but also in conventional sectors like non-banking finance, bio-tech and pharmaceuticals, modern trade, consumer goods as well as infrastructure,” the report said.

“We screened for unlisted firms for large profit pools and strong growth, tabulating the list of investments by major private equity (PE) firms, digging into deals news flow, and then meeting several PE firms to make sure the list was comprehensive,” it added.

Two investors Moneycontrol spoke to disagreed with the methodology, but acknowledged that India having 100 private companies valued at over a billion dollars is still a very positive sign. They requested not to be named.

The growing number of unicorns, and the increasing pace of reaching that valuation can be attributed to a buoyant funding environment over the years. According to the report, private market fundraising has exceeded public fundraising for each of the last ten years. “This may not be a permanent phenomenon, given generally the much larger liquidity and size of public markets, but is definitely not a fluke either,” it said.


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