Start-ups face churning amid inflation heat

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By S Jha

New Delhi, June 7: Even while the economy continues to slide on the growth path, the Indian start-ups are buzzing. There are now 101 unicorns in the country, each valued USD 1 billion and above.

The explosive growth in Indian start-up took place when the Covid-19 pandemic battered the economy. The fund houses high on cash chased the start-ups in India, largely on the digital theme.

The 101 unicorns are stated to be valued over USD 330 billion. The start-ups in the fintech space gained from the Prime Minister Narendra Modi’s announcement of demonetization on November 8, 2016.

The government’s overdrive to first go for cashless economy, later amended to less cash economy, ended up making the likes of Paytm windfall gains, netting customers overnight.

The venture capitalists boarded the start-ups in the hope of taking them to the stock markets with their listings to multiply their investments several times while the equities continued on the bull run after the onset of the Covid-19 pandemic and near zero rate in the US sending billions of USD in the Indian equity market.

Besides Fintech, Ed-tech start-ups have been buzzing with the venture capitalists taking their valuations to the soaring heights.

Physics Wallah, the 101st unicorn, is the latest entrant in the coveted club, and caters to the needs of the students preparing for the engineering entrance examinations in the country. Byju leads the Ed-Tech pack.

PM Modi has spent his time in a number of his ‘Mann Ki Baat’ radio programmes to hail the achievements of the start-ups. They have diversified. They are coming up in the tier II and III cities and are part of the solutions to several global challenges.

However, there’s a flip side to the start-up success story. Some of them are shutting down their shops. Funds are drying up. They cann’t burn the cash as they did in the past. Also, such start-ups have crowded the same space, fintechs and ed-techs.

Some of the largest fund houses like SoftBank and Tiger Global have burnt their fingers with deep losses in the last financial year. The start-ups they had backed bombed on the stock markers after their listings. Paytm share price went down from Rs 2000 to about Rs 600, and same has been true of a number of tech-backed start-ups, including the brokerages in the financial and automobile spaces.

Ed-tech start-up recently shut the shop, laying off employees, who were hired with fancy pay-packets, and returned the investments to the venture capitalists. Udayy was such a start-up which went bust.

Schools have opened up and the start-up business models based on premises that the children would stay only at home are now facing the heat.

Adding to the woes is the global spike in inflation, with consequent hike in the rates by the Central banks of the US and other countries, which in turn is pulling the capital back, leaving the financial market high and dry as seen in the downturn in the equity markets globally.

Yet, technology-based start-ups which are innovating with solutions in diverse areas are still being feted.

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