India’s biggest unicorns have got all the attention for their valuations, but a reality check shows trouble is brewing in paradise. A record 51 India-based Unicorns (including four listed players) have run up a cumulative loss of ₹48,582 crore ($6.5 billion) on a revenue of ₹1,82,746 lakh crore ($24.53 billion) in FY22. The 47 unlisted unicorns have cumulatively raised $33.65 billion and are collectively valued at $168 billion, which translates into a revenue multiple of 6.41 times for the entire universe, shows an analysis of the numbers from start-up tracker, Tracxn.

THE FOUR listed start-ups, Nykaa, Paytm, Zomato and Delhivery, were collectively valued at $29.26 as of March 2022 (May 2022 in case of Delhivery) even as they ended with a cumulative loss of ₹4,588 crore ($615 million) over a revenue of ₹20,790 crore ($2.80 billion).

A further slicing of the numbers by sectors and companies, though, throws up a completely different picture.

Among sectors, marketplace specialists such as Elastic, Moglix, Zetwerk, OfBusiness, Udaan and Mensa Brands account for a lion’s share (₹1.15 lakh crore) of the cumulative topline. Barring OfBusiness, all the other players are loss-making. Udaan has the highest share of losses at ₹3,123 crore. Of the lot, industrial goods and services procurement platform, OfBusiness, saw its total revenue soar over 4x to ₹7,269 crore from ₹1,757 crore in FY21, even as it churned out a profit of ₹201 crore. The Gurugram-based company, which had turned a unicorn in July 2021, notched up the near $5 billion valuation mark in December 2022. Incidentally, the company’s lending division, Oxyzo Financial Services, too, got valued at $1 billion following a $200 million Series A funding last year. The lending arm, which provides secured and unsecured loans to small and medium enterprises (SMEs) to buy raw materials, is also profitable at ₹69 crore.

While Udaan had raised $1.5 billion in funding and is valued at $3.1 billion, OfBusiness, which raised $886 million, is valued at $4.51 billion. On a revenue of ₹98,852 crore, while Udaan’s revenue multiple is least at 0.2 times, OfBusiness enjoys a 4.6 times multiple. Moglix, which raised $370 million, enjoys revenue multiples of 8 times on a $307 million revenue.

According to a report by Bain & Company and Accel, online marketplaces in India generate more than $100 billion in gross merchandise value, of which B2C marketplaces account for nearly $50 billion. With the current meltdown in the markets and rising interest rates in the U.S., raising funds for start-ups will not come easy, especially for ecommerce platforms. In fact, funding into internet marketplaces across B2B and B2C companies declined 72% year-on-year in CY22 to $4.5 billion from a record $16 billion in 2021.

No surprises here that the other two biggest loss-making segments are fintech (₹8,535 crore) and edtech (₹9,157 crore). The seven fintech unicorns, which have raised $4.09 billion and cumulatively valued at over $24.49 billion, have managed only ₹5,247 crore in cumulative revenue, losing more than a rupee for every single rupee of sale. If we add, listed Paytm to the list, the loss increases to ₹10,932 crore. BharatPe, which was in the news for all the wrong reasons, is the biggest loss-making fintech player at ₹5,610 crore on a topline of ₹680 crore, and yet enjoys a revenue multiple of over 30x. Excluding the other non-operating income, the operating revenue stood at ₹457 crore. Riddled with top level exits, including that of co-founder Ashneer Grover and CEO Suhail Sameer, the fintech has raised $580 million and was last valued at $2.75 billion following a $370 million Series E round led by Tiger Global Management.

The Walmart-backed payments platform, PhonePe, ratcheted up losses of ₹2,014 crore on a topline of ₹1,692 crore. Following a $200 million (₹1,650 crore) funding from Walmart this month, the fintech’s valuation has moved up to $12 billion, making it India’s most valuable fintech start-up as against the listed Paytm, which is valued at nearly $5 billion. The company today controls over 50% of the 8 billion transactions routed through the Unified Payments Interface. Paytm, on the other hand, too, incurred a loss of ₹2,396 crore on a revenue of ₹5,264 crore. PineLabs, however, is the most funded fintech with over $1.60 billion and is the second-highest valued fintech in the country at over $5 billion, translating into a revenue multiple of 39 times. PhonePe, on other hand, enjoys a revenue multiple of nearly 53 times on a revenue of ₹1,693 crore. The most richly valued fintech is the Temasek-backed credit card unicorn, OneCard, at 99 times its revenue multiple. The credit card player clocked an overall revenue of ₹99 crore in FY22 even as its loss expanded to ₹183 crore. The company had entered the unicorn club last July, following a $100 million Series D funding round led by Temasek, and other existing investors, Sequoia Capital, Hummingbird Ventures and QED.

Besides fintech, the promising edtech sector has, of late, been losing steam with five players piling up a cumulative loss of ₹9,157 crore ($1.2 billion) on a revenue of ₹4,153 crore, but still richly valued with a revenue multiple of over 53 times. Byju’s leads the pack with a loss of ₹4,589 crore on a revenue of ₹2,280 crore. But only in this case the financials are for FY21 as the company is yet to disclose its FY22 numbers. Incidentally, global investment major, Prosus, has pegged the fair value of its 9.67% stake in Byju’s at $578 million, valuing the edtech major at around $6 billion against the company’s last valuation of $22 billion. Co-founder Divya Gokulanth told Fortune India that the company will be switching over to a hybrid model of learning. “We launched 300 hybrid learning centres last year and we plan to do 300 more this year,” says Gokulnath. In bid to curtail losses and turn profitable, the company will be cutting down on its brand promotion costs, especially in sports. “We will not be renewing our branding partnerships,” adds Gokulnath. Byju’s, which has raised over $5 billion, currently has branding tie-ups with the Board of Control for Cricket in India, the International Cricket Council, and the Federation Internationale de Football Association. The second-biggest loss-making edtech player is Unacademy at ₹2,848 crore on a revenue of ₹844 crore, translating into a revenue multiple of over 30 times compared with nearly 72 times for Byju’s.

Software-as-a-service (SaaS) players are now facing headwinds with a recession in the U.S. and Europe, their two key markets. Though the asset-light Cloud-based businesses enjoy high gross margins, just like any other start-up, spending money on customer acquisition, in addition to marketing and employee costs, has resulted in six SaaS players incurring a loss of ₹336 crore on a revenue of ₹2,858 crore. While public market multiples of SaaS stocks have crashed to lower teens, the unlisted revenue multiples are still high at over 27 times. However, of the six, two players, BrowserStack and Uniphore, have turned out profits of ₹75 crore and ₹33 crore on revenues of ₹422 crore and ₹743 crore, respectively. However, compared with BrowerStack’s revenue multiple of 71 times, Uniphore is significantly lower at 25 times. These six firms have cumulatively raised $2 billion, valuing the pack at over $10.5 billion.

Ten retail consumer-focused unicorns, including Tata 1mg, Purplle, DealShare, Mamaearth, GlobalBees, MyGlamm, CarDekho, Licious, PharmEasy, and Lenskart, have seen losses mount to ₹11,440 crore ($1.5 billion) on a revenue of ₹18,350 crore in FY22. PharmEasy owns the bulk of the losses at ₹3,993 crore on a revenue of ₹5,781 crore, followed by LivSpace at over ₹1,000 crore on sales of ₹562 crore. Keeping them company in losses is the logistics sector (including food-delivery players) with five players raking in a loss of over ₹5,200 crore on a revenue of ₹1,633 crore. The two listed players, Zomato and Delhivery, posted losses of ₹2,233.50 crore on revenue of ₹11,725 crore ($1.57 billion). The logistics start-ups have cumulatively raised over $5 billion at a valuation of near $14.5 billion, while Delhivery and Zomato’s cumulative valuation stood at ₹1.03 lakh crore ($13.92 billion). Of the five unlisted unicorns, Swiggy posted the highest loss of ₹3,629 crore on a revenue of ₹6,120 crore, followed by Blinkit with ₹1,239 crore loss on ₹2,616 crore revenue. Of the lot, Swiggy is valued the highest at over $10 billion. In fact, Zomato’s losses, too, spiked 49.8% to ₹1,222 crore from ₹816 crore in FY21. However, as per a report by foreign research house, Jefferies, Swiggy is losing marketshare to Zomato, despite offering higher discounts. The finding is based on investor Prosus’ half-yearly report that puts the gross value of Swiggy’s food delivery business at ₹10,600 crore ($1.3 billion) in the first six months of FY23 compared with Zomato’s gross order volume of ₹13,000 crore ($1.6 billion).

According to reports, Swiggy, Byju’s, Zetwerk and BillDesk are some unicorns which have already seen some investors reneging on their binding commitments. The turn of events comes amid a report by Credit Suisse that states the value of unicorns in India is much larger compared with the size of the listed space at 11% as against 7% in China and 5% in the U.S.

What is worrisome is that the losses would have only widened in the current fiscal and given that the macro environment is increasingly turning from bad to worse, it’s only a matter of time before news of companies going belly-up or being gobbled up starts trickling in.

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