Which 8 Indian Unicorns Took a Hit from Investors in 2023? Check Here!

As we conclude the year, let's take a moment to reflect on the startup unicorns that disappointed their investors and witnessed valuation markdown.

Shreshtha Verma
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Indian Unicorns Took Hit from Investors 2023

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The Indian startup ecosystem has experienced an upward trajectory, maintaining its position as the third-largest startup economy globally while actively working towards further elevation. However, much like varying weather conditions, not every year unfolds favorably for the startup ecosystem.

2021 - The Dream Year Of Indian Startup Ecosystem

Despite the global challenges posed by the COVID crisis, 2021 emerged as a flourishing year for startups, presenting an opportunity for innovation. During 2021, the inventive solutions from Indian startups captured the attention of global investors, resulting in a staggering $42 billion infusion into Indian startups. This influx led to the creation of a record-breaking 44 unicorns throughout the year.

2022 - A Bitter-Sweet Year For Startups

However, the beginning of 2022 presented challenges for startups due to global economic disturbances arising from the Russia-Ukraine war. Central banks responded by abruptly increasing interest rates to mitigate inflation, causing investors to tighten their financial reins and plunging startup funding into a period of darkness. While a few unicorns emerged, they were predominantly in the latter half of 2022.

2023 - A Gloomy Year For Indian Unicorns

Moving into 2023, as we stand in the final month of the year, it becomes evident that this year has also been challenging for the startup industry. Investors began to perceive startups in their portfolios as overvalued, initiating a reevaluation process. Consequently, many Indian unicorns found themselves in a precarious position as investors marked down their valuations.

Unicorn Valution Markdown

As we conclude the year, let's take a moment to reflect on the startup unicorns that witnessed this valuation markdown.

Tough Times For BYJU’S 

In March 2022, BYJU’S, the leading edtech giant, celebrated a milestone by becoming the most valued Indian startup with a $22 billion valuation. However, its fortunes took a downturn as three major investors decided to mark down the value of their stakes in the company.

The first blow came from BlackRock, an investment firm, which reduced the value of its shares in BYJU’S by 50%, slashing the overall valuation to $11 billion. In April, BlackRock further decreased the share value to $2,855 per share, down from $4,660 per unit in April 2022. Subsequently, in June, Prosus, holding a 9.6% stake, devalued its share by 76.8%, reducing BYJU’S overall valuation to a mere $5.1 billion. In a recent update during its earnings call, Prosus disclosed another markdown, bringing BYJU’S valuation below $3 billion.

Joining the trend, Baron Capital also contributed to the woes in August by reducing BYJU’S valuation by 45%, settling it at $11.7 billion.

In addition to the financial challenges, BYJU’S has been entangled in a legal battle over a $1.2 billion Term Loan B and faces an investigation by the Enforcement Directorate for alleged FEMA violations. The company's failure to file FY22 financial statements led to the resignation of its statutory auditor Deloitte and three board members.

The startup has also witnessed a series of high-profile exits, including top executives such as Mrinal Mohit, Anil Goel, and Ajay Goel. With ongoing layoffs affecting thousands of employees since 2022, BYJU’S is currently undergoing another round of layoffs, impacting around 4,000 employees.

Swiggy Loses Decacorn Status

Despite entering the decacorn club early in 2022 with a $700 million funding round led by Invesco, foodtech major Swiggy faced a setback as the same investor marked down the value of its stake by 25%. This decrease dropped Swiggy’s total valuation to $8 billion, causing it to lose its decacorn status.

In October 2022, Invesco initiated the first markdown, which became public in April 2023. Subsequently, Invesco further reduced the stake value, bringing Swiggy’s valuation 48.5% lower from its peak at $10.7 billion.

During this period, Swiggy implemented cost-cutting measures, laying off around 380 employees and discontinuing its gourmet grocery delivery vertical, Handpicked.

While Swiggy is yet to disclose its FY23 financials, the startup faced increased losses, reaching INR 3,629 crores in FY22, with operating revenue rising to INR 5,704.9 crores. This resulted in a peak valuation at 15 times its operating revenue.

PharmEasy's Gets Into Difficulty

PharmEasy, grappling with financial challenges, witnessed Neuberger Berman slashing the value of its stake by 21% in May, leading to a valuation drop to $4.4 billion from its peak at $5.6 billion.

In November, Neuberger Berman further devalued its stake by over 90%, reducing PharmEasy's valuation to $550 million and stripping it of unicorn status. Additionally, UK-based investment firm Janus Henderson marked down PharmEasy’s valuation twice in May and June, collectively reducing the valuation by 52%.

Amid these valuation cuts, PharmEasy faced significant hurdles, including the cancellation of its proposed INR 6,500 crore IPO in 2022. To address financial issues, the startup borrowed INR 2,280 crores ($285 million) from Goldman Sachs, but breached loan covenant terms within a year, leading to repayment struggles.

The company also grappled with management issues, layoffs, and the exit of key personnel. With losses jumping 4.3 times to INR 2,731 crores in FY22, PharmEasy is yet to file its FY23 financials. The operating revenue stood at INR 5,729 crores, resulting in a valuation-to-operating revenue ratio of 7.8 times at its peak valuation.

Meesho Faces Fidelity Investments’ Devaluation

Once a leading figure in social commerce in India, Meesho encountered valuation markdowns in 2023. Key investor Fidelity Investments marked down the value of its stake by 9.7%, assessing the company’s valuation at $4.4 billion compared to its peak at $4.9 billion.

The markdown coincided with Meesho reporting a 550% surge in its loss to INR 3,247 crores in FY22, with operating revenue surging 300% to INR 3,359.4 crores. Meesho, now operating more within the B2C ecommerce space, undertook cost-restructuring measures, shutting down its grocery vertical Meesho Superstore in August and laying off over 700 employees since 2022.

While FY23 financial numbers are pending, Meesho's valuation-to-operating revenue ratio stands at 12 times at its current valuation.

Ola Cabs Faces Valuation Cuts Amid Regulatory Challenges

Ola Cabs, once a pioneer in online cab aggregator services, faced ongoing challenges and valuation markdowns. Vanguard Group, holding less than 1% stake in Ola's parent company ANI Technologies, began the series of markdowns in May by reducing the valuation by 35%, bringing it to $4.8 billion from $7.4 billion.

In August, Vanguard further slashed the valuation to $3.5 billion, and a month later, the investor cut the share worth by 63.7%, resulting in a valuation of $2.7 billion.

This valuation decrease occurred as Ola encountered regulatory challenges, delays in financial statement filings, and increased competition from rivals like Uber and BluSmart. Additionally, over 350 Ola Cabs were affected during floods in Uttar Pradesh’s Noida in July, intensifying the startup's challenges.

ANI Technologies is yet to file FY23 financial results, but in FY22, the overall loss surged to INR 1,522.3 crores, while operating revenue doubled to INR 1,970.4 crores. This translated to a valuation-to-operating revenue ratio of 30 times at its last reported valuation.

Pine Labs Sees A Downturn

Pine Labs, the Singapore-based fintech unicorn, experienced a downturn as two major investors devalued their stakes in the company. Neuberger Berman initiated the markdown by reducing its stake's valuation by 38%, causing Pine Labs' valuation to plummet from $5 billion to $3.1 billion in July 2021.

Boston-based Fidelity Investment followed suit, marking down its shares by 9.2% in June. These actions coincided with Pine Labs deferring its IPO plans due to weak market sentiment.

Pine Labs, which has secured over $1.2 billion in funding, is currently focusing on expansion in Southeast Asia, Malaysia, and the Middle East. While FY23 financial numbers are yet to be disclosed, the startup reported a loss of INR 259 crores in FY22, with operating revenue at INR 1,017 crores, resulting in a valuation-to-operating revenue ratio of 39 times at its last valuation.

Gupshup Loses Unicorn Status 

SaaS startup Gupshup faced the brunt of valuation markdowns in 2023, with Fidelity Investments initiating the first round in May. This resulted in Gupshup losing its unicorn status as Fidelity reduced the value of Gupshup’s shares by 36% to $957 million.

In June, Fidelity further trimmed the startup’s valuation by 36%, bringing it down to $882 million. The downward trend continued in July, with Fidelity reducing the share values by 50%, pushing Gupshup’s valuation further down to $697 million.

Once hailed as a unicorn in April 2021, Gupshup reported a net profit of INR 40 crores in FY22, with revenue from operations at INR 1,132 crores. This indicated a valuation-to-operating revenue ratio of 9.8 times.

Eruditus' Bad Financial Reporting

Edtech unicorn Eruditus, registered in Singapore, witnessed a valuation cut by The Private Shares Fund in the March quarter, reducing its valuation from $3.2 billion to $2.9 billion.

The Private Shares Fund, holding a 0.2% stake in Eruditus, lowered the fair value of its shares to $4.66 million. This development followed Eruditus reporting a 1.5 times increase in its loss to $386.6 million for FY22, with revenue from operations rising 1.8 times to $245.2 million. The valuation-to-operating revenue ratio stood at 13 times.

Recent reports suggest that the startup might experience exits of some US-based investors through a secondary round, with Japan’s SoftBank and Canada Pension Plan allegedly picking up stakes in the startup.

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