Snapshot 2021 – The Year of Startups Uprise, The Year of Unicorns

2020 was the year of COVID-19, impacting the economic activities to a greater extent. We saw the second wave in 2021. However, the accelerated immunisation drive and regulated resurrection of economic activities led to a faster recovery and optimistic performance of India Inc.

2021 was the year of startups and unicorns. 8 startups got listed on Dalal Street. A feat that was never achieved before. India became the hotspot of startups with more than 80 unicorns, only behind the US (ranked top), China, and the UK in terms of the number of operational unicorns.

With an astronomical valuation of $21 billion, BYJU’s was the most valuable startup of the company, followed by the largest IPO issuer Paytm.

A total of 65 companies launched their IPOs in 2021 and raised an all-time high of $8.8 billion (Rs. 1.31 lakh crore), which is approx. 75% higher from the previous record year of 2017. 70% of this amount came from Startup IPOs. 

Reliance retained its Numero Uno position as the most valuable company in the country, followed by TCS. Reliance raised $35 billion by monetizing stakes in Jio Platforms and Reliance Retail apart from a $7 billion rights. Thus, becoming a zero net-debt company.

India witnessed an all-time high in M&A deals, with 80% first time buyers and mostly mid-sized, ranging from $500 million to $1 billion. The Zee-Sony merger was the highlight of the year.

2021: The Year of Startups

52 weeks of 2021 saw 43 new Startup unicorns in India. In fact, one crazy week in April witnessed SIX Unicorns. The figure shows the Startup Euphoria in Digital India, where people believe in creating disruptive solutions from zany ideas.

Source: Business Insider

Source: CB Insights

2021: A Year of IPO frenzy

In the year 2021, a total of 65 companies launched their IPOs and garnered more than INR 1.31 lakh crore, 75% higher from the previous record year of 2017.

The year 2021 broke all the records in terms of total fund-raising, IPO issue size, subscription and debut premium. However, the experts believe 2022 is also expected to be a strong year for the primary market. One97 Communications, the parent company of Paytm, raised the biggest IPO in the history of the Indian capital market for an amount of INR 18,300 crore, though the issue received lukewarm response from investors.

Source: Money Control

Startup IPOs in 2021

Source: Economic Times

Source: Business Insider

Top 10 companies by Valuation

Reliance retained its top spot as the most valuable company, with a valuation of INR 16,65,281 crore, followed by TCS and HDFC Bank.

“With a total value of $3 trillion, more than India’s current GDP, they make up the backbone of India’s economy. Together, these 500 companies had combined sales of $770 billion, and employed 6.9 million staff, which is more than the working population of United Arab Emirates,” said Anas Rahman Junaid, MD and Chief Researcher, Hurun India.

Source: Hurun India

Mergers & Acquisitions in 2021

The country witnessed an all-time high in M&A deals, with 80% first time buyers and mostly mid-sized, ranging from $500 million to $1 billion. As per Bain & Company’s Karan Singh, “The unprecedented flurry of deals seen in 2021 is the result of a higher pressure to grow and a need to seize more opportunities to disrupt, faced by CEOs today”.

Buyers were focused towards entering new business genres, geographies and new competencies, rather than plain vanilla scale deals. More than 45% of the strategic deals were scope and capability deals (compared to 36% in 2020).

“This surge in deal activity was primarily due to companies continuing to borrow economically and spending their cash reserves on transformative deals to reposition themselves for the post-Covid-19 world. Corporate India has previously demonstrated agility and adaptability in the face of crisis,\” said Shanthi Vijetha, Partner, Growth, Grant Thornton Bharat.

Reliance has been aggressively growing its emerging businesses through M&A with recent acquisitions in retail, digital, and renewables sectors.

Similarly, the Tata Group is actively reshaping its portfolio and has done over 20 deals in the last two years, including multiple acquisitions such as BigBasket and 1mg to build its super-app.

The highlight of the year was the mega merger between Zee and Sony, creating the second largest entertainment network in the country. Sony will hold 50.8% in the merged entity, while domestic shareholders will hold over 47%. Zee promoter family is likely to hold 3.99%, with a provision to increase stake of up to 20% via buying shares at market value.

Majority of the deal-making activity involving India targeted the financial sector which totaled $21.9 billion in deal value, up 156% from a year ago and captured 24.2% market share. Energy and power accounted for 15.2% market share after a 12.1% growth in value to $13.7 billion. High technology, which saw the highest number of deals, captured 14.0% and saw a 182.7% year-on-year growth in value worth $12.7 billion.

In the start-up world, companies are venturing into M&A to build scale rapidly, enter new geographies, access new lines of business, and deliver a full omni-channel experience to customers. For example, BYJU’s has been on a $2 billion acquisition spree, with 11+ acquisitions—of which approx. $1 billion went towards acquiring Aakash Educational Services, to build an omnichannel learning offering for their test-prep vertical, along with other acquisitions. Oyo has been making several acquisitions globally to enter new geographies.

What’s ahead in 2022?

As per Rahul Khanna, Managing Partner, Trifecta, “2021 was a watershed year for the tech ecosystem in India thanks to significant exits through IPO’s and M&A activity. This has created significant wealth for the founders, employees and investors in these companies which should feed further investment activity in 2022. While some concerns remain around COVID, rising inflation and excessive liquidity impacting valuations, India continues to be a hotbed of startup activity and we are cautiously optimistic about the coming year”.

It is foreseen that the bullish trend in the Indian startup and corporate world is likely to continue and another exceptional year is expected in 2022.

The first unicorn of the year is already reported with D2C startup Mamaearth closing its latest funding round at a valuation of $1.2 billion. More than five are likely to go public in the first half of the year. Fintech, SaaS, health-tech, and education are likely to be the top themes for investors in the coming year.

As per Inc42, it is expected that India would close 150 unicorns in 2022 and 200 unicorns by 2025, the biggest startups will drive major acquisitions. Indian startups are expected to create a value of over $1 trillion by 2025, and employ over 3.25 million people.

2025 Indian Startup Projections

Source: Inc42

Amid a promising time, there are still some hurdles that start-ups will have to cross to reach their desired growth level, for raising funds and entering public markets. This includes navigating a slow economic recovery in India, inflation pressure as well as policy normalization from global central banks, the so-called third wave of COVID 19 and many others.