Venture capital, though not new in India, has expanded in the last decade; India has created over a 100 unicorns with a combined market capitalization of $240 billion. This enormous wealth creation has spurred a growing investor appetite for start-ups. More than $60 billion has been invested in Indian start-ups over the past five years, with around $12 billion in 2020 alone. The most astounding example is the resounding success of the food delivery app, Zomato, which after registering a robust listing day gain of 66% continues to scale new highs every day despite not making a single rupee by way of profits.
The growth of Silicon Valley type start-ups in India has been funded mainly by global venture capital funds, technology funds and private equity. These companies have served their shareholder base well—grown in scale and rewarded their investors with handsome returns. For example, the sale of Flipkart to Walmart valued the company at $22 billion and turned its two 37-year-old founders into billionaires.
The recent $2 billion acquisition of BigBasket by Tatas underlines the trend of domestic investors and large corporates entering this sector with organic build-ups and inorganic acquisitions. As these companies now outpace some of their existing shareholder base, they are looking to list on Indian stock exchanges to access more mature and late-stage capital, and help their early investors monetize their stakes. This is a departure from the conventional route of ‘finding value in the US market’.