Lenskart and Globalbees are standing at the door to enter the “Unicorn Club.” Both the startups are in separate talks to raise fundings from investors who would value them at Billion Dollars, thereby joining the Unicorn Club. But why has India had such a colossal rise in unicorns this year? Let’s find out!
India is now home to more than 60 unicorns, startups valued at $1 billion or more, with more than half of them entering the coveted club this year. Many of these 33 unicorns, which have cumulatively raised about $9.3 billion to date, have also seen a surge in valuations.
The vast majority of unicorns have never made a profit. Yet, billions have been poured into them by the world’s most prominent, most adventurous financiers hoping to find the Amazons and Facebooks of the future. Amazon and Facebook also lost money for years as they expanded and expanded, eventually becoming super-profitable.
Yes, the market has been in a bull run for the past 1.5 years (Reasons? We have covered it here) with Sensex and Nifty ascending records. Companies and startups are finding this to be a perfect stage to raise money by going public. Investors and Venture Capitalists are funding startups because there is ample liquidity (or simple ample cash) in the system (RBI has pumped liquid money into the economy while India was in the lethal 2nd Wave). These, along with the rampant spread of technology post-pandemic, have favored many startups and companies. However, as a coin has two sides, here too, we have the darker side.
However, as is the law of nature- History tends to repeat itself. Take, for instance, the year 2007. The total number of IPOs filed in 2007 was a whopping 108 as opposed to 41 this year. However, we all know what happened in 2008. A similar instance was seen during the dot com bubble in the late 1990s where the market was in a bull run, and soon after, the IT sector shares plunged.
No one knows how much correction the market will have and how many IPOs and Unicorns India will see in 2021. Only time will tell. However, there are some things that we as investors can take care of. As Navin Agarwal, the MD of Motilal Oswal, quotes-
A clear investment philosophy and an armoury of investment frameworks can add value to the portfolio returns, while market timing can detract a lot of value.
There is a reason why compounding magic is known as the eighth wonder of the world. The Sensex has multiplied 460 times, or a cumulative return of 16%, since its inception in March 1979. During this time, gold has multiplied 68 times (a 10% compounded return) and bank savings have multiplied 36 times (compounded return of 9%). The future of stocks looks fascinating. If only we had the patience to wait for the future to emerge.
So yeah, all in all, studying the fundamentals of a company and comparing it with the sector, in general, should be the prime focus for every investor.
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Global News from all around the world
- RBI imposes a 1 Crore penalty on Paytm payments bank.
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- Chemical stocks plunged amid the weak Q2 results.
- IRCTC plunged over 15% after hitting a record high on Teusday’s session.
- Jio to join Dunzo’s fundraising party.
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