Decreasing Valuation Of Indian Start-Ups: A Point Of Concern For Indian Start-up Ecosystem!

Several of the largest Indian companies are seeing a decline in their valuations, at least in the vision of their investors. The list includes a new name. For example, the value of the ride-hailing startup Ola was reduced by 35% to $4.8 billion by funds controlled by the US investment firm Vanguard, according to regulatory filings with the US Securities and Exchange Commission. According to Vanguard’s disclosures, the value of Ola shares held by the group’s funds decreased from $311.85 on August 31, 2022, to around $203.78 per share as of February 28, 2023. In December 2021, Edelweiss Private Equity led a $139 million Series J fundraising deal for the mobility startup.

This development followed Ola’s decision to abandon industries, including food and grocery delivery and used vehicle sales in 2022 to concentrate on its core ride-hailing operation. Due to the pandemic’s dramatic decline in ride-hailing income, it has joined several of these industries.

Ola Shutdowns non-core enterprises.

In June of 2022, it was reported that Ola would close its quick-commerce and used-car marketplaces. However, the firm declared it would continue investing in the ride-hailing industry. Aggarwal, the founder of Ola, had previously said that the ride-hailing industry was lucrative but that new competitors had emerged due to the pandemic.

Arun Sirdeshmukh, the chief executive of Ola Cars (the used-car division), Varun Dubey, and Vinay Bhopatkar oversaw numerous companies, including food and grocery delivery, left the entity as a result of the shutdowns.

Rapido, a three-wheeled taxi, has significantly increased its market share. In addition, BluSmart, an all-electric taxi firm funded by BP Ventures, has received the money in numerous rounds and aspires to expand its fleet size to over 10,000 by FY24.

Electric cab companies operate under a distinct economic model since they either own or lease the vehicles and hire drivers, giving them significant influence over the services’ quality, which has dramatically declined since the epidemic.

Uber and Tata Motors have also agreed to deploy more than 25,000 electric vehicles over the next three years. On January 4, it was revealed that Ola intended to test its electric taxi service in Bengaluru using roughly 1,000 vehicles.

On May 9, it was revealed that Invesco had reduced Swiggy’s valuation from its peak of over $10 billion to around $5.5 billion. Blackrock halved Byju’s valuation to around $11 billion in the edtech sector.

As of 3.01.2023, Invesco valued Swiggy’s shares at $3,305 per share, down from $4,759 in October of 2022 when it initially reduced the company’s share value amid a general correction of the global technology industry. Invesco said that to appraise its portfolio, it considers other market players.

Changes & Challenges by Swiggy.

Swiggy’s worth has decreased due to the delivery business’s new difficulties. 380 people were let go by the SoftBank-backed startup this year as its primary food delivery business contracted.

Additionally, according to a report by trading company Jefferies, Zomato’s grocery delivery service Blinkit is outperforming Swiggy’s rapid commerce division Instamart. According to the research, Instamart’s GMV for the first half of 2022 was $257 million, as opposed to Zomato-owned Blinkit’s $270 million GMV.

The trouble list of Byju.

BlackRock estimated Byju to be worth $2,400 per share at the end of December 2022, down from $4,600 in April of last year, valuing the business at a little over $11 billion.

BlackRock, the most significant asset manager in the world, has less than 1% of the company. The most valuable privately owned startup in India, Byju’s, with a valuation of $22 billion at the time of its most recent fundraising in October 2022. This is the company’s first reduction in price; it has come under scrutiny for filing earnings reports late and for general business practices such as misrepresenting the value of its courses and how it recognises income.

Periodic evaluations of valuation.

US institutional investors and mutual funds administer periodically assess the value of their assets. In 2016, despite a fundraising slowdown that was at the moment comparatively less severe, mutual funds reduced the valuations of companies, including Flipkart, Ola, Paytm, and others.

The impact of reducing valuation.

The valuation reductions now compound the impact of the deteriorating market circumstances on Indian startups. The pace of funding in the Indian startup ecosystem decreased last year. Still, because many larger businesses obtained money through convertible notes (delaying price discovery) or did not seek any money, their previous values have remained steady.

The founder and CEO of SoftBank Group, Masayoshi Son, hinted at this tendency last year when he warned that the financing crunch for startups would extend longer due to sure unicorns’ reluctance to accept lower values in new funding discussions.

Conclusion.

Around seven Indian firms lost their unicorn status in the previous handful of years, according to a survey by private market tracker Venture Intelligence. Around 105 firms in India achieved unicorn status between CY18 and CY22 (to date). Still, due to numerous factors—including seven losing valuations owing to investor markdowns and another four being acquired—there are currently just 84 operational unicorns. Additionally, about ten businesses not included in Venture Intelligence’s unicorn tracker list in the previous five years were placed on public markets.

However, it’s crucial to keep in focus that investors value the stock of the companies in their current portfolios in a variety of ways, and one backer’s valuation adjustment, while notable, may not necessarily reflect the opinions of other investors and in some cases, the businesses themselves.

Proofread & Published By Naveenika Chauhan