India's 100 unicorns

100 Unicorns: India’s changing
corporate landscape
India Market Strategy
Asia Pacific/India, Equity Research, 10 March 2021
Research Analysts
Neelkanth Mishra, Abhay Khaitan, Varun Ahuja, Krati Sanklecha, Anubhav Aggarwal, Lokesh Garg , Ashish Gupta, Arnab Mitra,
Prateek Singh, Satyam Thakur, Rikin Shah, Kush Shah, Garima Bharti, Gaurav Birmiwal, Jayant Kharote, Sayantan Maji, Pratik
Rangnekar, Viral Shah
DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST
CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. U.S. Disclosure: Credit Suisse
does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm
may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
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India Market Strategy 3
Contents
Focus charts.................................................................................4
100 Unicorns ................................................................................5
List of Unicorns ............................................................................7
Transformation in the corporate landscape ................................9
The Enablers: Funding, infrastructure, regulation.....................15
The beginning, not the end of unicorn seeding.........................21
FinTech ....................................................................................21
EdTech.....................................................................................24
Indian SaaS...............................................................................27
E-commerce .............................................................................31
Discretionary .............................................................................33
Pharmaceuticals/Bio-Tech.........................................................36
A virtuous cycle?........................................................................39
List of firms.................................................................................43
Allied Blenders & Distillers (ABD) ............................. 43 Innovaccer..............................................................93
Anthem Biosciences................................................ 44 Intas Pharmaceuticals..............................................94
Aptus Finance......................................................... 45 Joyalukkas .............................................................95
Atria Convergence Technologies............................... 46 Kurl-on...................................................................96
Bharat Biotech........................................................ 47 Lenskart.................................................................97
BharatPe................................................................ 48 Macleods Pharmaceuticals.......................................98
Bhilosa Industries Pvt Ltd ........................................ 49 Manipal Hospitals....................................................99
Bigtree Entertainment (BookMyShow) ...................... 50 Medha Servo Drives ..............................................100
Bill Desk ................................................................ 51 Meesho................................................................101
BrainBees Solution (FirstCry) ................................... 52 Mu Sigma.............................................................102
BrowerStack........................................................... 53 MX Player ............................................................103
Bundl Technologies (Swiggy) ................................... 54 Mytrah Energy ......................................................104
CarDekho (Girnarsoft Automobiles Pvt Ltd) ............... 55 National Stock Exchange.......................................105
Cars24................................................................... 56 Nykaa E-Retail......................................................106
Chargebee ............................................................. 57 Ola Cabs (ANI Technologies Pvt Ltd)......................107
CitiusTech.............................................................. 58 Ola Electric Mobility...............................................108
CLP Wind Farms (India) Pvt Ltd............................... 59 Oravel Stays (Oyo Rooms) .....................................109
CureFit................................................................... 60 Parle Products......................................................110
Dailyhunt VerSe...................................................... 61 Paytm ..................................................................111
D’decor.................................................................. 62 PharmEasy...........................................................112
Deccan Fine Chemicals ........................................... 63 PhonePe..............................................................113
Delhivery Pvt Ltd..................................................... 64 Pine Labs.............................................................114
Digit....................................................................... 65 Piramal Glass........................................................115
Druva Data Solutions............................................... 66 PlayGames24x7 (RummyCircle) .............................116
Ecom Express......................................................... 67 Policybazaar..........................................................117
Eightfold................................................................. 68 Postman...............................................................118
Emcure Pharmaceuticals ......................................... 69 Rategain...............................................................119
Enzen Global Solutions Pvt Ltd................................. 70 Razorpay ..............................................................120
Eruditus Education .................................................. 71 ReNew Power Ventures.........................................121
Essar Ports............................................................. 72 RSPL Limited .......................................................122
Five Star Business Finance...................................... 73 Serum Institute of India..........................................123
Flipkart................................................................... 74 Sharechat.............................................................124
Freshworks............................................................. 75 Sorting Hat Technologies (Unacademy).....................125
Galactus Funware Technology (MPL)........................ 76 Sporta Technologies (Dream11).............................126
Gharda Chemicals................................................... 77 Sri Chaitanya ........................................................127
Glance ................................................................... 78 Star Health...........................................................128
GlobalLogic ............................................................ 79 Supermart Grocery Supplies (BigBasket).................129
Greenko Group....................................................... 80 Synechron............................................................130
Grey-Orange .......................................................... 81 Think and Learn (Byju’s)........................................131
Groww ................................................................... 82 Udaan..................................................................132
GRT Jewellers Limited............................................. 83 UrbanClap Technologies (Urban Company)..............133
Haldiram’s.............................................................. 84 UST.....................................................................134
Headspin................................................................ 85 Vini Cosmetics......................................................135
Hero Fincorp Ltd..................................................... 86 Vishal Mega Mart ..................................................136
Hetero Labs ........................................................... 87 Wonder Cement....................................................137
HighRadius............................................................. 88 Zenoti ..................................................................138
IBS Software.......................................................... 89 Zerodha ...............................................................139
Icertis..................................................................... 90 Zoho....................................................................140
Infra.Market............................................................ 91 Zomato ................................................................141
InMobi.................................................................... 92 Zoomcar...............................................................142
9
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21
39
43
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4
Focus charts
Figure 1: Indian equity fundraising—private tops public Figure 2: Sectoral split by number—highly diverse
Source: VCCedge, Credit Suisse Source: Credit Suisse
Figure 3: Two-thirds of unicorns started after 2005 Figure 4: 87% of the BSE-500 started before 2000
Source: Credit Suisse Source: CMIE, Credit Suisse
Figure 5: More than 6k startups were funded in 2019 Figure 6: Number of millionaires in India rising sharply
Source: VCCedge, Credit Suisse Source: CS Global Wealth Report, Credit Suisse
0
5
10
15
20
25
30
35
40
45
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Private Equity Deals Public Offerings
US$ bn
9%
13%
7%
4%
3%
10%
4%
2%
12%
10%
2%
4%
3%
3%
2%
12%
Healthcare
Financials
Others
Energy
Staples
Discretionary
Logistics
Industrials
IT/Tech
E-commerce
Foodtech
Education
Mobility
Gaming
Insurance
SaaS Split of 100 unicorns by sector
1% 9%
9%
15%
35%
31%
Before 1950
1950-1975
1975-1990
1990-2000
2000-2010
2010-2020
Split of unicorns by year of incorporation
16%
20%
26%
25%
9%
4%
Before 1950
1950-1975
1975-1990
1990-2000
2000-2010
2010-2020
Split of BSE500 firms by year of incorporation
0
1
2
3
4
5
6
7
2012 2013 2014 2015 2016 2017 2018 2019
Funded Startups (k)
0
100
200
300
400
500
600
700
800
900
1000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Number of millionaires in India (k)
Increase of 569k in last 2 years
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100 Unicorns
India’s corporate landscape is undergoing a radical change due to a remarkable confluence of changes in
the funding, regulatory and business environment in the country over the past two decades. An
unprecedented pace of new-company formation and innovation in a variety of sectors has meant a surge
in the number of highly-valued, as-yet unlisted companies. While conventional Unicorn lists show 30-35
names for India, our exploration reveals a 100 of them!
Transformation in the corporate landscape
Against 336 listed companies with billion dollar-plus market
capitalisation, there are now 100 unicorns in India with a
combined market capitalisation of US$240 bn. Two-thirds of
these firms started after 2005, whereas only 46 of the listed
firms were founded this century, and as many as 112
started before 1975. The sectoral split is highly diversified:
in addition to the largely expected e-commerce, FinTech,
education technology, food delivery and mobility companies,
there is a rapidly growing number of such firms in Software-
as-a-Service (SaaS), gaming, new-age distribution and
logistics, modern trade, bio-tech, pharmaceuticals, and even
fast-growing consumer brands benefitting from accelerating
penetration and formalisation. These are only at the top of a
fast-growing pyramid of 80,000 start-ups in India, which are
incrementally now nearly 10% of new companies formed
every year; the number of firms is up 70% in 8 years. There
is some geographical diversity in the cities where these firms
started, though there is some concentration in Bengaluru,
Mumbai and the National Capital Region (NCR), Delhi.
The Enablers: Funding, infrastructure, regulation
The growth in highly valued companies has been enabled by
a range of factors: (1) the natural shortage of risk capital in
an economy with low per capita wealth has been addressed
by a surge in (mostly foreign) private equity: these flows
have exceeded public market transactions in each year of
the last decade; (2) increase in teledensity and smartphone
and internet penetration. Till 2005 less than 15% of Indians
had a phone, versus 85% now; 700 mn-plus people have
internet access now due to cheap data and falling
smartphone prices (40% penetration now); (3) deep-rooted
physical infrastructure changes: nearly all habitations are
now connected by all-weather roads compared to only half
in 2000, and all households are electrified now vs. just 54%
in 2001; (4) financial innovation is accelerating, courtesy the
world-leading “India stack”, which has innovative applications
like UPI built on a base of universal bank account access,
mobiles, and the biometric-ID (Aadhaar), helped by greater
data availability; and (5) development of ecosystems in
several sectors that now provides a competitive advantage
versus global peers; for example in technology (4.5 mn IT
professionals) and pharma/biotech (several Indian firms can
now afford US$200-300 mn of annual R&D).
The beginning, not the end of unicorn seeding
We dig into segments that have a concentration of unicorns:
FinTech, e-commerce, SaaS, EduTech, pharma/ biotech and
consumer discretionary. In addition to the common drivers, each
of these also has several idiosyncratic catalysts, like the
astonishing surge in the number of SaaS unicorns being driven
by the changing nature of software and software development,
and enabled by a very large available pool of trained software
engineers, many of whom accidentally discovered their work had
business value. Similarly, e-commerce, modern-trade and
regulatory tightening by the government are driving formalisation
of erstwhile mature but extremely fragmented businesses like
that of jewellery, as well as creation of new consumer brands in
novel and fast-growing categories supported by new advertising
channels and the rise of professional distributors. Elsewhere,
while technology was anyway considered critical to solve India’s
troubling education problem, the pandemic last year catalysed a
level of penetration that may have taken several years otherwise.
In pharma/biotech, India’s switch to process patents in the
1970s and the US’ 1984 Hatch-Waxman Act supported the
development of a large and complex ecosystem, which has now
scaled up. Each of these segments can continue to throw up
innovative and high-value companies, in our view.
A virtuous cycle?
In a country notorious for stifling entrepreneurship, new company
formation was quite strong even in the 1980s, though lack of
access to capital was a challenge. This changed as economic
reforms freed up capital access, but sizeable investments were
still limited to a handful of family-owned dynastic businesses. The
surge in unicorns creates numerous large pools of risk capital:
even at 15-20% residual ownership on average of these
businesses, US$35-50 bn of wealth has likely been created.
This has contributed to the growth in the number of millionaires in
India (as also Ultra High Net Worth Individuals), which had
stagnated for several years, but has started to rise rapidly of late.
Unlike for family-owned, generations-old businesses this capital
once monetised is likely to be deployed in new ventures. Exits for
private equity investors should also trigger more interest in Indian
businesses. These businesses are also likely to impact the
broader economy: combined revenues were Rs2.4 tn in FY20
(1.2% of GDP), but growing rapidly. If growth rates sustain,
incremental revenues could be 5.3% of incremental GDP in 5
years. The second-order effects: indirect employment,
improvement in economy-wide productivity, are harder to
quantify, but are also likely to be meaningful, in our view.
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6
We found 100 unicorns in India in a
diverse set of industries: not just the
usual technology or tech-enabled
sectors, but also in pharma/biotech and
consumer goods, benefiting from
formalisation and accelerating adoption.
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List of Unicorns
Company Sector Company Sector
Wonder Cement Cement Sporta Technologies (Dream11) Gaming
Deccan Fine Chemicals Chemicals Anthem Biosciences Healthcare
Gharda Chemicals Chemicals Bharat Biotech Healthcare
Enzen Global Solutions Pvt Ltd Consulting Emcure Pharmaceuticals Healthcare
Mu Sigma Consulting Hetero Labs Healthcare
Allied Blenders & Distillers (ABD) Discretionary Intas Pharmaceuticals Healthcare
D'Decor Discretionary Macleods Pharmaceuticals Healthcare
GRT Jewellers Limited Discretionary Manipal Hospitals Healthcare
Joyalukkas Discretionary Pharmeasy Healthcare
Kurl-On Discretionary Serum Institute of India Healthcare
Oravel Stays (Oyo Rooms) Discretionary Infra.Market Industrials
Piramal Glass Discretionary Medha Servo Drives Industrials
Rategain Discretionary Digit Insurance
Vini Cosmetics Discretionary Policybazaar Insurance
Vishal Mega Mart Discretionary CitiusTech IT/Tech
Bigtree Entertainment (BookMyShow) E-commerce Dailyhunt Verse IT/Tech
BrainBees Solution (FirstCry) E-commerce Glance IT/Tech
CarDekho (Girnarsoft Automobiles Pvt Ltd)E-commerce GlobalLogic IT/Tech
Cars24 E-commerce Grey-Orange IT/Tech
CureFit E-commerce Headspin IT/Tech
Flipkart E-commerce InMobi IT/Tech
Lenskart E-commerce Meesho IT/Tech
Nykaa E-Retail E-commerce MX Player IT/Tech
Supermart Grocery Supplies (BigBasket) E-commerce Sharechat IT/Tech
UrbanClap Technologies (Urban Company)E-commerce Synechron IT/Tech
Eruditus Education Education UST IT/Tech
Sorting Hat Technologies (Unacademy) Education Delhivery Pvt Ltd Logistics
Sri Chaitanya Education Ecom Express Logistics
Think and Learn (Byju's) Education Essar Ports Logistics
CLP Wind Farms (India) Pvt Ltd Energy Udaan Logistics
Greenko Group Energy Ola Cabs (ANI Technologies Pvt Ltd) Mobility
Mytrah Energy Energy Ola Electric Mobility Mobility
ReNew Power Ventures Energy Zoomcar Mobility
Aptus Finance Financials BrowerStack SaaS
BharatPe Financials Chargebee SaaS
Bill Desk Financials Druva Data Solutions SaaS
Five Star Business Finance Financials Eightfold SaaS
Groww Financials Freshworks SaaS
Hero Fincorp Ltd Financials HighRadius SaaS
National Stock Exchange Financials IBS Software SaaS
Paytm Financials Icertis SaaS
PhonePe Financials Innovaccer SaaS
Pine Labs Financials Postman SaaS
Razorpay Financials Zenoti SaaS
Star Health Financials Zoho SaaS
Zerodha Financials Haldiram's Staples
Bundl Technologies (Swiggy) Foodtech Parle Products Staples
Zomato Foodtech RSPL Limited Staples
Galactus Funware Technology (MPL) Gaming Atria Convergence Technologies Telecom
PlayGames24x7 (RummyCircle) Gaming Bhilosa Industries Pvt Ltd Textiles
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8
The corporate landscape in India is
rapidly transforming: 66 firms in our list
did not exist till 2005, whereas 180 of
the BSE500 started before 1975.
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Transformation in the corporate
landscape
Fast growing and innovative (unlisted) firms are sprouting up in new sectors and locations across India;
many have rapidly gained scale
A fast-growing but less familiar part of the economy
With a rapidly growing economy, the market capitalisation of
listed equities in India has risen too (Figure 7), making India
the 8th
largest market globally, and only 7% away from
being the 6th
largest, after the US, China, HK, Japan and
the UK. The number of listed companies with market
capitalisation above US$1 bn has risen to 336 from 178 in
2010 and just 72 in 2005 (Figure 8). Remarkably, while
some standard unicorn lists, which count unlisted firms
valued above US$1 bn mention 30-35 companies, a more
rigorous investigation reveals as many as 100 unicorns in
India, with a combined valuation of US$240 bn.
We spread our net wider, looking beyond the ‘normal’
technology or technology-enabled sectors, which are
expected to have unicorns, but also in conventional sectors
like non-banking finance, bio-tech and pharmaceuticals,
modern trade, consumer goods as well as infrastructure (e.g.
new ports or renewable energy generation). We screened for
unlisted firms with large profit pools and strong growth,
tabulating the list of investments by major private equity
investors, digging into deals news flow, and then meeting
several PE firms to make sure the list was comprehensive.
Focussing only on deals is a natural limitation: firms that
generate sufficient cash for reinvestment get excluded.
Conversely, a better assessment of the value of loss-making
firms may come from funds who invest in them.
Inclusion: We include firms that meet one of the three
criteria below:
 have seen a funding round at a valuation exceeding
US$1 bn;
 reported an EBITDA in FY20 that, at the average
valuation multiples of listed peers, would give them a
valuation in excess of US$1 bn; or
 where the last funding round was at less than US$1 bn
some time back, but the business momentum has been
strong since then, implying higher current valuations.
Exclusion: We have excluded several firms that had
received funding at unicorn valuations, but have since then
slipped in their business, and have either already had a
“down round”, or are likely to have one. We also exclude
firms that are subsidiaries of listed companies. We have also
excluded Indian subsidiaries of global firms, some of which
have become sizeable. Some firms which often appear in
new reports as unicorns, either as exploring mergers with
SPACs, or having raised capital but do not have an
understandable business model are also excluded.
Figure 7: Market capitalisation of listed equities has risen Figure 8: No. of listed $bn+ firms have risen steadily
Source: The BLOOMBERG PROFESSIONALTM
service, Credit Suisse Source: The BLOOMBERG PROFESSIONALTM
service, Credit Suisse
0%
20%
40%
60%
80%
100%
120%
0
500
1,000
1,500
2,000
2,500
3,000
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
Market cap (US$ bn) Mcap to GDP (%, RHS)
0
50
100
150
200
250
300
350
400
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Number of US$1 bn+ listed companies
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10
A highly diverse sectoral mix
The sectoral-split of firms in the list show a high level of
diversification (Figure 9 shows the split by number and
Figure 10 by value). The largely expected e-commerce,
education technology (EduTech), food-tech and mobility
companies account for less than a fourth of the total.
The largest number of firms are in finance (all non-banks),
which includes a few conventional NBFCs (non-banking
finance companies) in addition to the highly disruptive
financial technology (FinTech) companies: given the unique
position India is in (low financialisation and at the same time
world-leading financial infrastructure: discussed in detail in
the third section of this report), this is not surprising.
Software as a Service (SaaS), niche IT Service providers,
gaming companies, insurance technology, and even new-
age distribution and logistics firms enabled by technology
have also achieved sufficient scale to be included in this list.
In addition, there are purely conventional companies that
are growing rapidly as they drive, and at the same time
benefit from, formalisation of their industries, e.g.
jewellers, upcoming retail chains, providers of fabric and
mattresses, or even in packaged food.
In the process of discovering these companies we came
across several more in each of these categories that are
innovative, fast growing and led by strong promoters, but
are not large enough yet to be included in this list.
Corporate rejuvenation? Most firms started post-2005
While there are a few firms of old vintage, particularly firms
in conventional businesses like the National Stock
Exchange, Transunion CIBIL (consumer credit data provider)
or Parle Biscuits, most of these firms have been formed
after 2005 (Figure 11). This is noteworthy, as just 13% of
the BSE500 firms have started after 2000 (Figure 12), and
36% had started before 1975 (the year in which the oldest
of this report’s authors was born).
As we are only considering companies with valuation in the
neighbourhood or in excess of US$1 bn, and only 336 of
BSE500 firms cross that threshold, this is an extraordinary
episode of new-company formation in what has traditionally
been a slow process.
Figure 9: Sectoral split by number: highly diverse Figure 10: Sectoral split of unicorns by value
Source: Credit Suisse Source: Credit Suisse
Figure 11: Two-thirds of unicorns started after 2005 Figure 12: 87% of the BSE500 started before 2000
Source: Credit Suisse Source: CMIE, Credit Suisse
9%
13%
7%
4%
3%
10%
4%
2%
12%
10%
2%
4%
3%
3%
2%
12%
Healthcare
Financials
Others
Energy
Staples
Discretionary
Logistics
Industrials
IT/Tech
E-commerce
Foodtech
Education
Mobility
Gaming
Insurance
SaaS
Split of 100 unicorns by sector
7%
15%
17%
4%
14%
8%
7%
5%
5%
3%
1%
2% 3%
1%
3% 3%
Discretionary
Healthcare
Financials
Others
E-commerce
SaaS
Education
Energy
IT/Tech
Logistics
Insurance
Gaming
Staples
Industrials
Mobility
Foodtech
Split of 100 unicorns by valuation
1% 9%
9%
15%
35%
31%
Before 1950
1950-1975
1975-1990
1990-2000
2000-2010
2010-2020
Split of unicorns by year of incorporation
16%
20%
26%
25%
9%
4%
Before 1950
1950-1975
1975-1990
1990-2000
2000-2010
2010-2020
Split of BSE500 firms by year of incorporation
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As we discuss in detail in the next section, several enabling
conditions improved to boost the number of start-ups: an
estimated 80,000 by 2019 (Figure 13). These include
(1) availability of risk capital, which improved meaningfully
after 2005, (2) a fertile ecosystem in several of the sub-
segments: e.g. a massive number of software engineers
facilitated the creation of Software-as-a-Service, or SaaS
start-ups, a critical transition from services to products at the
cutting edge of developer needs; the near universal reach of
bank accounts and creation of the “India Stack” enabled
financial innovation; better road networks and media access
provided an opportunity to formalise and consolidate
erstwhile undeveloped markets in consumer goods; (3)
examples of wealth creation by first-generation
entrepreneurs inspired new ones to start businesses, or
experienced professionals to join hands with private-equity
investors in return for stock; and (4) a general pick-up in
new company formation in India (Figure 16), with the active
companies growing to 1.3 mn vs just 700k in 2012.
Start-ups account for a reasonably high 6-7% of these
firms, and the ratio has risen over the past decade, with new
start-ups incrementally 10% of the new firms created
(Figure 15). Not every new company is classified a “start-
up” as several are created as subsidiaries of existing large
firms. Several headline-grabbing funding transactions in the
2013-15 period led to a surge in the number of start-ups in
2015, as well as funding deals.
The dip in average deal sizes to US$7-10 mn showed these
firms were still in early stages of development. Since then, as the
euphoria has subsided, the number of transactions has come
down, but, reflecting late-stage transactions, the average deal
size has picked up, taking total funding to US$40 bn in CY2019.
A third of the US$45 bn of funds raised in CY2020 are for
the telecom/internet subsidiaries of Reliance Industries.
However, the year saw 1,338 transactions despite the
pandemic-induced uncertainty slowing deal-making in the
first nine months of the calendar year (Figure 16).
Information technology, discretionary and healthcare
continued to be the dominant sectors in 2020. The decline
in volumes from peak in percentage terms has been the
worst for industrials: from 113 in 2008 to just 56 in CY20.
Staples saw a record high 106 deals in 2019, but the value
per deal was just US$6 mn. Financials and materials have
fewer deals but the average deal size is larger.
Figure 13: No. of start-ups has surged in recent years Figure 14: As has new-company registrations
Source: VCCedge, Credit Suisse Source: MCA, Credit Suisse
Figure 15: “Start-ups” account for 7-10% of new firms Figure 16: Sectoral split of deals in CY2020
Source: VCCedge, MCA, Credit Suisse Source: VCCedge, Credit Suisse
6.4%
6.6%
6.8%
7.0%
7.2%
7.4%
7.6%
7.8%
8.0%
8.2%
0
10
20
30
40
50
60
70
80
90
2012 2013 2014 2015 2016 2017 2018 2019
Total (k) Funded as % of Total (RHS)
Number of start-ups
0
500
1,000
1,500
2,000
2,500
1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021
Total companies in MCA database (k) Active
0%
5%
10%
15%
20%
25%
2013 2014 2015 2016 2017 2018 2019 2020
Startups as % of total new companies
57%
17%
8%
6%
6%
4% 1%
1%
0%
0%
IT
Discretionary
Healthcare
Staples
Financials
Industrials
Materials
Utilities
Telecom
Energy Sectoral split of deals in CY2020
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12
Transaction values in IT, discretionary and financials
continued to be strong in 2020 (Figure 17). Overall
transaction values were still higher, as the average deal size
climbed (Figure 18). Business momentum for most of the
technology and tech-enabled firms though remained robust,
and in fact picked up meaningfully in several sectors. For the
non-technology sectors, investors likely held back, but as
the economy continues to recover, and medium-term growth
expectations start to see upgrades, deals may restart.
Geographical spread is wide as well
In the past firms have chosen to shift their corporate offices
to one of the metros as they gained scale. This is primarily
to tap into a bigger talent pool of senior management, as
well as easy global connectivity. However, most tend to
retain their registered offices; assuming that these reflect
the city of origin, we find that about half of BSE500 firms
started in Mumbai, Delhi and Bengaluru (Figure 19), and
about 20% started outside the top 10 cities.
The spread of unicorns is different, with Bengaluru the
dominant centre (Figure 20), followed closely by Delhi NCR
and Mumbai. FinTech firms are concentrated in Mumbai and
Bengaluru: the first due to the preponderance of financial
services firms and personnel, and the latter due to the
technology talent and a vibrant VC ecosystem. Segments
that focus on export markets, like SaaS and
pharmaceuticals/BioTech have mostly emerged in hubs that
have both human resource and funding ecosystems in place,
as well as global connectivity. Interestingly, some SaaS firms
have also emerged from smaller towns. Some of the
consumer discretionary names have emerged in smaller
towns, and then grown their business nationally. Others like
the formal jewellery retailers have grown on the back of
strong local markets in Tamil Nadu and Kerala.
Figure 17: IT, Discretionary & financials led by deal value Figure 18: Quantum of funding up due to deal sizes
Source: VCCedge, Credit Suisse Source: VCCedge, Credit Suisse
Figure 19: Geographical split of the BSE500 Figure 20: Geographical split of Unicorns is wide too
Source: CMIE, Credit Suisse Source: Credit Suisse
0
5
10
15
20
25
30
35
40
45
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
IT Disc. Health Fin. Materials Util. Industr. Oth
US$ bn
0
7
14
21
28
35
0
500
1000
1500
2000
2500
2005 2007 2009 2011 2013 2015 2017 2019
Number of Deals Avg deal size ($ Mn) (RHS)
32%
13%
6%
6%
5%
5%
4%
4%
2%
1%
1%
1%
1%
1%
1%
18%
Mumbai
Delhi
Bengaluru
Kolkata
Chennai
Pune
Ahmedabad
Hyderabad
Vadodara
Thane
Kochi
Noida
Aurangabad
Gandhinagar
Gurgaon
Others Geographical split of BSE500 firms
6%
28%
8%
20%
8%
5%
5%
7%
13%
Delhi
Bengaluru
Hyderabad
Mumbai
Gurgaon
Pune
Noida
Chennai
Others Split of unicorns by founding location
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Figure 21: Geographical spread
Source: Credit Suisse
Hyderabad
Bharat Biotech
Deccan Fine
Chemicals
Greenko
Hetero Labs
HighRadius
Medha Servo
Drives
Mytrah Energy
Zenoti
Nimbahera
Wonder Cement
Jaipur
CarDekho
Macleods Pharma
Delhi
BharatPe
Ecom Express
Grey-Orange
Hero FinCorp
Lenskart
RateGain
Gurgaon
Cars24
Delhivery
Oyo Rooms
Policy Bazaar
Renew Power
Urban Company
Vishal Megamarts
Zomato
Noida
EightFold
Global Logic
Innovaccer
PayTM
Pine Labs
Kanpur
RSPL
Nagpur
Haldiram
Vijaywada
Sri Chaitanya
Chennai
Aptus Finance
Chargebee
Freshworks
Fivestar Finance
GRT Jewellers
StarHealth
Zoho
Kochi
UST Global
Trivandrum
IBS Software
Ahmedabad
Vini Cosmetics
Intas Pharma
Hazira
Essar Port
Thrissur
Joyalukkas
Bengaluru
ACT
Anthem
Biosciences
BigBasket
Byju’s
CureFit
DailyHunt
Digit
Enzen
Flipkart
Glance
Groww
Headspin
Icertis
Kurl-On
Manipal
Hospitals
Meesho
MPL
MuSigma
Ola
Ola Electric
PhonePe
Postman
Razorpay
Sharechat
Swiggy
Udaan
Unacademy
Zerodha
Zoomcar
Pune
Firstcry
Druva Data
EmCure
Serum Inst
Synechron
Mumbai
Allied Blenders
Bhilosa
BillDesk
BookMyShow
Browser Stack
CLP Wind
Farms
Citius
D’ Decor
Dream11
Eruditus
Games 24x7
Gharda
Chemicals
InMobi
Infra Market
Parle Biscuits
MX Player
NSE
Nykaa
Pharmeasy
Piramal Glass
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14
The surge in private equity funding
has helped address the shortage of risk
capital; ground-up infrastructure
improvements (roads, electricity, data,
computing) have widened market access.
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The Enablers: Funding, infrastructure,
regulation
Not just rapid economic growth, but a range of enabling trends have helped the
growth of Unicorns: surge in private funding, grassroots physical and virtual
connectivity, and set-up of digital infrastructure.
The growth in highly valued companies has been enabled by
a range of factors that we explore in this section: (1) the
growth in private equity helping address the shortage of risk
capital; (2) increase in teledensity, data usage and
smartphone penetration; (3) development of the “India
stack”; (4) improvement in ground-level infrastructure like
rural roads and electrification; (5) development of
ecosystems in technology and pharma/biotech.
Scarcity of risk capital solved: private now > public
The surge in private equity flows for Indian firms has been
such that private market fund-raising has exceeded public
market transactions in each year of the last decade (Figure
22). This may not be a permanent phenomenon, given the
generally much larger liquidity and size of public markets, but
this is definitely not a fluke either.
While private equity firms tapping into domestic pools of
capital are emerging too (more on this in the fourth section
of this report), much of the current inflow is foreign. The rise
of private equity has been a global trend over the past
decade (Figure 23), and as pension and insurance fund
managers switch to alternate assets in their allocations in
response to record low interest rates, is likely to persist.
This inflow has helped address a significant shortage of risk
capital in India. Low per-capita-GDP economies like India
are generally short of equity capital. Not only do they have
low wealth per capita (Figure 24), most household wealth is
in hard assets like the land they own, the house they live in,
the shop they own, the vehicle they use, or gold. The share
of their wealth in financial assets is low (Figure 25). Further,
even for financial wealth the first investment preference for
households tends to be capital-assured asset classes like
bank deposits. It is only beyond a certain quantum of weatlh,
and usually after the purchase of a house that households
begin to invest in equity of firms they do not run themselves.
How did this happen in other economies when they were at
the per capita income and wealth of India? First, the
transition of currently developed markets out of their
emerging market status occurred over a much longer period,
with growth averaging 2-3% a year over a century or more.
Wealth thus accumulated over a period of time, and was
able to provide the risk capital necessary to finance this level
of growth. To grow at 6-8% annually for a few decades
though one needs significantly large amounts of risk capital.
Some emerging markets (including the US in the early 19th
century) also used debt as risk capital, and had several
boom-bust cycles in debt. The Chinese model of growth has
also relied on debt-funded growth, with state ownership
reducing the risk of systemic instability when loans go bad.
Figure 22: Indian equity fundraising: private tops public Figure 23: Private equity deals have risen globally too
Source: VCCedge, Credit Suisse Source: VCCedge, Credit Suisse
0
5
10
15
20
25
30
35
40
45
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Private Equity Deals Public Offerings
US$ bn
0
100
200
300
400
500
600
700
800
900
1000
2005 2007 2009 2011 2013 2015 2017 2019
Global private capital raised ($Bn)
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16
Given an aversion to boom-bust cycles of debt, and low
availability of locally available risk capital, India has been
short of risk capital. If a business needed Rs1 bn of equity
capital, only a handful of business families could afford that.
As these unicorns (started by mostly first-generation wealth
creators) start deploying their capital, this problem would be
less acute in a few years’ time.
Rise in telecom, data and smartphone penetration
Till 2005, less than one in six Indians had a phone, and
while rural teledensity today is just 60%, it was less than
10% as recently as 2008 (Figure 26). The recent apparent
decline, particularly in urban areas is due to the drop in dual-
sim usage. Without a phone, economic scale is hard to
achieve, with costlier economic linkages as well as elevated
friction in the job market making large parts of the economy
inaccessible for various products and services.
Even today products that cost more than Rs200-300/month
per capita struggle to reach penetration exceeding 70%.
Innovative pre-paid subscription models that provided
connections at ARPU as low as Rs30-40 makes the
individuals more productive.
Similarly, a sharp drop in data prices has led to a dramatic
jump in data usage (Figure 27). Total data usage per capita
in India remains low, given the very weak fixed-line
broadband penetration, but India leads in mobile data usage.
This was enabled by a precipitous drop in data costs in
2016-17, and appears to be stabilising now. Even as fixed-
line broadband data penetration rises steadily (ADC, one of
the unicorns, operates in this space) from its low base, the
rapid rise in smartphone ownership (Figure 28) has brought
cheap computing and through that, usable internet
connectivity to the masses.
Reach is thus no longer a bottleneck—not just for Business-
to-Consumer business models in goods (e.g., groceries,
medicines) and services (e.g., education, health), but also
Business-to-Business expansion, for instance, for logistics
companeis like Udaan connecting with millions of retailers
efficiently, or share-cab operators tracking their fleets.
Figure 24: India has low wealth per capita Figure 25: Financial share of wealth low for poor nations
Source: CS Global Wealth Report, Credit Suisse Source: CS Global Wealth Report, Credit Suisse
Figure 26: Tele-density has improved in last 20 years Figure 27: Data usage rose sharply after 2016
Source: TRAI, Credit Suisse Source: TRAI, Credit Suisse
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
BD KE ID VN IN ZA TH CH JP UK US
Wealth per adult (US$), 2019
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
BD KE ID VN IN ZA TH CH JP UK US
Financial wealth as % of Gross Wealth, 2019
0
20
40
60
80
100
120
140
160
180
200
Dec-03
Sep-04
Jun-05
Mar-06
Dec-06
Sep-07
Jun-08
Mar-09
Dec-09
Sep-10
Jun-11
Mar-12
Dec-12
Sep-13
Jun-14
Mar-15
Dec-15
Sep-16
Jun-17
Mar-18
Dec-18
Sep-19
Jun-20
Teledensity (per 100 people) Urban Rural
0
50
100
150
200
250
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
Sep-20
Data Usage (MB/month) Outgo per GB (Rs)
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Better physical reach, household productivity
The past 20 years have also seen an inflection in rural all-
weather road connectivity, courtesy the Pradhan Mantri
Gram Sadak Yojana (PMGSY) and several similar state-level
schemes (Figure 30). Not only has this enabled labour
mobility, but also expansion of fulfilment networks for larger
firms, as well as efficient extraction of production from the
villages, not only of dairy, poultry and meat, but also
handicraft and products.
This access to roads also improved the ability to provide
electricity connections, pushing India’s household
electrification to nearly 100% from less than 60% in 2001
(Figure 31). While rural electrification has been a
government priority since the 1970s, achieving the objective
first needed a rural road network to be built.
Most than just stringing a wire to every house, the availability
of power has improved as well, from being avaialble for 5-6
hours a day to 20-23 hours a day in most areas, and 24
hours a day in some states.
Not only does electricity help extend the working day (light
from other sources is expensive), it also allows productivity-
enhancing appliances like fans, refrigerators, induction
cooktops and mixer-grinders to be used in more households.
Phone usage as well as the maintenance of phone networks
has also improved due to these changes.
Phones, roads and electricity have driven the Silent
Transformation of India that we first wrote about in 2013.
A leapfrog in financial penetration: the India Stack
India’s bio-metric ID system, Aadhaar, now has 1.29 bn
registrations. Not only has it significantly expanded state
capacity, but it has dramatically reduced the cost of setting
up and conducting financial operations, starting with KYC.
Without Aadhaar and mobile phones, the nearly universal
availability of bank accounts would not have been possible
(Figure 32). This has allowed the government to clean-up
fiscal transfers to the poor, but also allowed for a new open-
architecture for India’s financial system: the India Stack.
Figure 28: Smartphone ownership has risen sharply Figure 29: Also boosting internet penetration
Source: TRAI, Credit Suisse Source: TRAI, Credit Suisse
Figure 30: Road connectivity has surged esp. in rural Figure 31: Household Electrification has reached 100%
Source: CMIE, Credit Suisse Source: CMIE, Credit Suisse
5%
11%
18%
24%
29%
33%
36%
38%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
2013 2014 2015 2016 2017 2018 2019 2020
Smartphone penetration In India
0
20
40
60
80
100
120
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
Internet Subscribers (Per 100) Urban Rural
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
2016
Rural Urban
Length of roads (Mn Km)
56
67
88
100
0
20
40
60
80
100
120
2001 2011 2016 2019
% of Households having electriicy
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18
The India Stack, unlike the closed and/or silo-ed systems
seen in the developed world and China, works with
interoperability across multiple systems. Forming the base of
the stack are the JAM trinity: Jan Dhan (Banking for All),
Aadhaar (unique biometric ID) and Mobile connectivity,
which enable financial firms to uniquely identify individuals
with their bank accounts with a two-layer verification using
one-time passwords (OTP) sent on mobile phones. Consent
and privacy are also integrated into this stack by design.
Above this are the application layers that allow paperless Know-
Your-Client (KYC) checks, provide digital storage for IDs (e.g.
once verified on a Central KYC registry say for a mutual fund
folio, the person can use the same verification across all MF
providers), as well as a pathbreaking application layer for
cashless transactions: the Unified Payments Interface (UPI).
UPI allows peer-to-peer or even merchant payments with
the convenience of sending a message. UPI transactions
have been growing at a rapid pace, and have already
crossed Rs1 tn daily (Figure 34).
In this process, as India leapfrogs over a cards-based
payment system, straight to the more efficient digital
system, the share of digital transactions has increased to
30% in FY2021 from just 5% in FY2016 (Figure 35). This
has been led by the sustained 100%-plus growth in UPI
transactions, and continued growth in IMPS (Immediate
Payment Service), which was the precursor to UPI.
While the cards ecosystem is still growing rapidly from a low
base, the rapid spread of smartphones has enabled FinTech
firms to enrol a large number of merchants for UPI-based
payments. Wallet operators like Paytm, WhatsApp Business,
PhonePe and Khatabook each already have more
merchants signed up than the POS machines set up by all
banks cumulatively in the last two decades (Figure 36).
Not surprisingly, therefore, while most UPI payments are
Person-to-Person (P2P), the Person-to-Merchant (P2M)
transactions have already become comparable to the POS
transactions (Figure 37).
Figure 32: Nearly every household has a bank account Figure 33: India Stack builds on Aadhaar, Jan Dhan
Source: Saubhagya, Credit Suisse Source: Credit Suisse
Figure 34: UPI transactions (daily average) rising sharply Figure 35: Digital payments gaining share from cash
Source: RBI, Credit Suisse Source: RBI, Credit Suisse
35.0%
53.0%
80.0%
99.6%
0%
20%
40%
60%
80%
100%
120%
2011 2014 2017 2020
Percentage of Indians (15+) with bank accounts
350 mn bank accounts
opened so far
Average balance > Rs 2,700
~1.2bn Aadhaar cards issued
(> 90% of the population)
~850nm mobile phone users
Smartphone penetration at
~50% and rising
~700mn smartphones by
2020E
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
200%
0
20
40
60
80
100
120
140
160
Apr-16
Aug-16
Dec-16
Apr-17
Aug-17
Dec-17
Apr-18
Aug-18
Dec-18
Apr-19
Aug-19
Dec-19
Apr-20
Aug-20
Dec-20
UPI Transactions
Volume (mn) Value (₹ bn) Growth YoY (RHS)
0%
10%
20%
30%
40%
-
500
1,000
1,500
2,000
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21E
Digital Cards Cash Share of digital (%) (RHS)
US$ bn
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Rapid growth in IT-trained manpower
The growth in India’s IT services industry triggered a
significant increase in the number of engineering colleges
and gradates: so much so that there was an overshoot in
the number of graduates, forcing closure of many such
colleges that could not compete in placing their graduates
(Figure 38). This ended up being a market-based
mechanism for weeding out poor quality capacity.
Many, if not most, of this cohort of engineers still needed
retraining by IT services firms. Despite a slowdown in growth
in headcount of the sector, there are now 4.5 mn individuals
that know programming and have a functional knowledge of
developing or maintaining software.
This has helped create the manpower for companies driving
technology-led innovation, not just in old-economy firms or
consultancies, but also new-age firms in e-commerce,
financial technology, education technology as well as
software product companies in the Software-as-a-Service
(SaaS) space.
Ease-of-doing-business and formalisation
Government efforts to widen the tax base and simplify the
start and end of companies has helped faster-than-market
growth in segments that had significant fragmentation and
informality. Some of the changes triggered by the
simplification of India’s labour code and the Ease-of-Doing-
Business are of recent vintage, and are likely to encourage
several more entrepreneurs to embark on their own
ventures.
In the next section we will explore the sector-specific
changes in some sectors that have a meaningful and rapidly
growing number of unicorns.
Figure 36: Payment/wallet firms onboarding merchants Figure 37: UPI P2M now comparable to POS spends
Source: NPCI, Credit Suisse Source: RBI, Credit Suisse
Figure 38: India adding 3.5 mn engineering graduates
p.a.
Figure 39: India employs 4.5mn IT engineers
Source: CMIE, Credit Suisse Source: Nasscom, Credit Suisse
17
15
13
8
5 5
3 3
1.4
0.2
0
2
4
6
8
10
12
14
16
18
PayTM
Whatsapp
Bussiness
PhonePe
Khatabook
System
POS
Razorpay
Google
Pay
Mobikwik
Mwipe
Pine
Labs
Merchants (mn)
208
322
428
456
503
511
647
624
230
376
473
498
543
548
686
674
231
287
338
394
419
466
554
610
0
100
200
300
400
500
600
700
800
Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20
Rs bn
Credit Card usage at POS Debit Card usage at POS UPI P2M
2.4
2.9
3.0
3.3
3.5 3.5 3.4
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2013 2014 2015 2016 2017 2018 2019
Annual engineering graduates (mn)
0%
7%
14%
21%
28%
35%
0.0
1.0
2.0
3.0
4.0
5.0
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
IT Employees (mn) IT Employees growth (RHS)
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20
Several sector-specific changes like
ecosystem maturation in IT (for SaaS
and e-commerce), firms reaching scale
in pharma/biotech, and the India Stack
for FinTech are likely to accelerate
innovation.
“
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The beginning, not the end of unicorn
seeding
We explore in detail the sectors that have a clutch of unicorns: FinTech, education,
SaaS, e-commerce, discretionary, and pharmaceuticals/biotech
FinTech
Financial services have low penetration in India. Over the past decade, capability has been improving step-by-
step. Starting with universal banking access, spread of computing/internet and Aadhaar helped the
development of the India Stack. The growth in digital payments and data generation has now set the stage for
innovative and scalable solutions across lending, insurance, investing and wealth management.
~30% of retail spends now through digital means
Riding on a public payments infrastructure, digital
payments have leapfrogged in India, growing ~10.5x over
the past five years to an annual payment run-rate of
US$450 bn and now constituting ~30% of retail
transactions. We note that UPI is the major driver of this
accelerated payment digitisation as it opened up an
interoperable payment network to large tech companies.
Within 4-5 years of their launches, Google Pay and
PhonePe have built 75-100 mn users each, transacting
through their UPI-based payments app: together they
account for ~83% of total UPI volumes. To address
concerns on concentration and monopoly risks though,
recently UPI’s self-regulatory body, National Payment
Corporation of India (NPCI), has proposed a 30% market
share cap per firm.
Figure 40: Large user base for wallets/payment cos. Figure 41: UPI has led surge in digital transactions
Source: RBI, NPCI, Credit Suisse Source: RBI, NPCI, Credit Suisse
Figure 42: ~75-100 mn users for Google Pay/PhonePe Figure 43: These two are 80%+ of UPI transactions
Source: Company data, NPCI Source: NPCI
603
459
150
120
100
75
0
100
200
300
400
500
600
700
Smartphone
users
Whatsapp PayTM Mobikwik PhonePe Google
Pay
Users (mn)
0%
5%
10%
15%
20%
25%
30%
35%
40%
0
10
20
30
40
50
60
70
FY16 FY17 FY18 FY19 FY20
POS IMPS Prepaid UPI Share of UPI (RHS)
22
67
75
0
20
40
60
80
100
120
0
200
400
600
800
1000
1200
1400
1600
1800
Dec-18
Aug-19
Apr-20
May-20
Jun-20
Jul-20
Aug-20
Sep-20
Oct-20
Nov-20
Google Pay
Monthly UPI trnx (Rs bn)
Monthly active users (mn; RHS)
50
60
100
0
20
40
60
80
100
120
0
200
400
600
800
1000
1200
1400
1600
1800
Dec-18
Aug-19
Apr-20
May-20
Jun-20
Jul-20
Aug-20
Sep-20
Oct-20
Nov-20
PhonePe
0%
20%
40%
60%
80%
100%
Dec-18 Aug-19 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20
UPI market share
PhonePe Google Pe PayTM Others
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22
Specialised POS terminal/payment gateways for P2M
PI payments, while growing fast, are still predominantly used
for P2P (Peer-to-Peer or Person-to-Person) payments
(85% share). There are, however, specialised POS terminal
and payment gateways which process an annualised
US$140 bn of card and UPI P2M (Person-to-Merchant)
payment transactions. On the off-line side, players such as
Pine Labs, MSwipe and Paytm, comprise ~10-15% of total
P2M payments and together account for ~25% of total
POS terminals installed in the country, whereas Bill Desk is
the market leader in the online payment gateway,
processing US$80 bn of bill payments annually.
FinTech unlocking consumer credit for >150 mn users
Having acquired a substantial user base, FinTechs and e-
commerce players have started offering small-ticket
personal loans or short-term credit to monetise their user
base—mostly in partnership with banks/NBFCs. At the
same time, many specialised digital consumer financiers
have emerged, providing EMI or Buy-Now, Pay Later
(BNPL) credit either at POS terminals (for offline payments)
or as a payment mode on checkout pages (for online) for
more than 150 mn users. Paytm, Flipkart and Amazon
provide short-term credit (15-30 days) of Rs5-60k for online
spends, helping increase financing options especially when
credit card penetration in India remains low at ~4%. On the
other hand, specialised players such as KrazyBee, LazyPay,
Zest Money, Simpl, provide transactional credit with an
intent to provide longer tenure, higher ticket personal loans
to existing customers having good repayment behaviour.
Retail digital lending: US$110 bn by 2019 itself
Retail digital lending has delivered ~43% CAGR over the past
seven years, reaching US$110 bn in size by 2019. This has
been led by the emergence and growth of many specialised
digital lenders like pay day, SME, unsecured retail and BNPL
(Book Now, Pay Later) lenders who differentiate mainly
through faster disbursements (often within minutes for small
ticket consumer/personal loans), using alternative data
sources for underwriting and reach to customers who were
hitherto outside formal credit due to lack of bureau records.
They have gained more than a 40% market share in new
personal loans and 20%+ in unsecured retail loans.
Figure 44: Retail digital lending—43% CAGR in 7 years Figure 45: Share of FinTech rising across segments
Source: Experian Source: Experian
Figure 46: FinTech loan ticket-size is smaller… Figure 47: …but growing, as underwriting matures
Source: Experian Source: Experian
9
14
23
33
46
58
75
110
0
20
40
60
80
100
120
2012 2013 2014 2015 2016 2017 2018 2019
Digital lending in India (US$ bn)
1%
23%
41% 44%
8%
23%
40%
0%
10%
20%
30%
40%
50%
60%
4Q17 4Q18 4Q19 Jan & Feb
20
4Q18 4Q19 4Q19
Share in personal loans sourced (nos) Share in retail
unsecured loans
(nos)
Share in
consumer
durable
loans (%
YoY)
FinTech lenders
394
76
8
30 18 24
0
50
100
150
200
250
300
350
400
450
Banks NBFCs FinTechs Banks NBFCs FinTechs
Personal loans Consumer durable loans
Avg ticket size (Rs '000; 4Q19)
61%
48%
42%
33%
40%
45%
3%
9% 9%
0%
10%
20%
30%
40%
50%
60%
70%
4Q18
4Q19
Jan&Feb'20
4Q18
4Q19
Jan&Feb'20
4Q18
4Q19
Jan&Feb'20
< Rs5K Rs5K-10K Rs10K-20K
Share of FinTech personal loans - according
to Avg ticket size
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Providing small ticket, contextual unsecured credit has been
the primary target segment for a large section of digital
lenders, as they lend to customers having no/limited credit
record. According to data from Experian, the average ticket
size for personal loans by FinTechs is 0.02x of the average
ticket size for banks and is 0.8x in case of consumer durable
loans. That said, the average ticket size for digital lenders is
increasing, as they add new loan products with higher ticket
size and tenure based on confidence in their underwriting
models, and where lending to existing non-delinquent
customers helps improve profitability, given better asset
quality and otherwise high customer acquisition cost.
Digital lenders worst impacted by COVID-19
Pre-pandemic, digital lenders were growing at 70-330% YoY
across personal, consumer and retail business loans riding atop
the India stack and alternative underwriting models. They were
impacted the most by lockdowns with consequent moratoriums
over collections and containing delinquency losses becoming
the main focus. Growth took a back seat. Disbursement
volumes are now gradually recovering, and though still below
pre-pandemic levels, given the short-cycle nature of these
loans, are likely to resume rapid growth once lenders see the
economy is back on the growth path.
Figure 48: FinTechs expanding into newer segments to increase engagement, the addressable market and drive
monetisation
Source: Company data, Credit Suisse
PhonePe Payments E-commerce Investing (MF/Gold) Insurance
Off-line merchant
tieups
Online merchant
tieup – presence
within app
PayTM
Payments &
wallet
E-commerce
Investing
(MF/Gold/FDs)
Equity broking &
Insurance
Off-line merchant
tieups & VAS
Consumer internet
(gaming, travel,
entertain)
Consumer lending
(BNPL, PL)
Offline merchant
lending
Mobikwik
Payments &
wallet
Consumer
lending (PL, CL)
Investing (MF/Gold) Insurance Payment gateway
Google Pay Payments
Consumer
lending (PL)
Investing (MF/Gold) Merchant lending
Pine Labs
POS player
(larger ent)
VAS for
merchants
GC, loyalty and
rewards mgmt
Consumer financing
at POS
(BNPL, EMI)
Digital platform for
business bank
(Neo bk)
Merchant lending
Mswipe
POS player
(SMEs)
VAS for
merchants
Pay-by-link and
micro websites
Consumer financing
at POS (EMI)
Merchant lending
Razorpay
Payments
gateway
VAS for online
merchants
Pay-by-link and
ePOS
Digital platform for
business bank
(Neo bk)
Merchant lending
Yono
Mobile / internet
bnkg
New customer
acq
Pre-approved PL Insurance E-commerce
Khatabook
LendingKart
Digital MSME
loans
Co-lending
platform
Digital ledger
(kirana & small
merchants
Payments Merchant lending
KrazyBee Digital PL
BNPL/
consumer loans
Co-lending
platform
Capital Float
Digital MSME
loans
BNPL/
consumer loans
Zest Money
BNPL for e-
commerce trnx
BNPL for off-line
trnx
Simpl
BNPL for e-
commerce trnx
Merchant loyalty
prgm
PolicyBazaar
Insurance
aggregator
Lending
(retail, business)
Investing
(MF, FDs)
Zerodha Broking MF investing
Loan against
shares / MF
Smallcase Basket investing
Advisory platform
for RAs
Trading gateway
natively
InsurTech
WealthTech
Open banking / Digital lending
Merchant payments / POS / payment gateway
Payments / wallets
Core offering Expansion into new segments
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24
EdTech
While India solved the enrolment problem last decade, education outcomes continue to be a challenge.
The advent of cheap computing, internet access, global innovations in pedagogy and the accelerated
adoption driven by the pandemic have boosted the business opportunity.
Total learners base in India is c.360 mn
Education in India is one of the big sectors with a total
learners’ base of c.360 mn and total education spending of
US$110 bn in FY20. However, the sector has been plagued
by legacy issues—quality of teachers, archaic teaching
methodology and poor infrastructure. Hence, online education
(EdTech) is seen as a solution for some of these problems.
But, the penetration of online education (as % of total
education spending) has remained low (less than 1%) despite
the emergence of many start-ups over the last 5-10 years.
COVID-19 has accelerated the adoption of online learning
That said, COVID-19 is seen as the inflection point in the
sector with online learning seeing accelerated adoption with
c.320 mn students impacted by the lock down and several
social distancing measures taken by government/authorities
to contain the pandemic. These restrictions forced the
students and parents to evaluate the online mode of learning
thus significantly lowered the psychological barriers. Byju’s,
one of the leading EdTech companies in India, added 20 mn
users in the first four months after the lock down compared
to the 40 mn user base the company added in the first 4.5
years before the pandemic. Unacademy, the second most
valuable EdTech in India, registered an 82% rise in revenue
for Apr-2020, which was 10x higher compared to the same
period last year. The strong growth in the sector can also be
gauged by the increased investments from PE/VC in 2020.
As per PGA Labs, total EdTech funding in India increased
by 4x to US$2.2 bn in 2020 compared to 2019.
Figure 49: Education in India is one of the big sectors with a total learners’ base of c.360 mn
Source: DICE, AISHE, AICTE, Mettl report, PGA Labs
Figure 50: Total EdTech funding in India increased by 4x in 2020
Source: PGA Labs deal database
K-G5, 49%
G6-8, 26%
G9-10, 15%
G11-12, 10%
Grade-wise
Rural,
70%
Urban,
30%
Location
Govt,
56%
Priavte,
44%
Management type
English,
24%
Others,
76%
Medium of
instruction
<INR 12K,
87%
INR 12-18K,
7%
INR 18-30K,
3%
>INR 30K,
3%
School fee
261mn
Pre-K, 9%
K-12, 73%
College, 9%
Corporate, 9%
Total learner's
universe
360mm
258 211
805
553
2,215
0
500
1,000
1,500
2,000
2,500
2016 2017 2018 2019 2020
Total funding in Edtech sector (US$ mn)
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K12 and test preparation is the largest sub-segment
The EdTech sector in India can be sub-segmented in to:
 Pre-school (0-5 years): includes play schools, day care
etc.
 K–12 and test competition (6-17 years):
supplemental school education and competitive exam
preparation (engineering, medical college entrance
exams, etc.)
 Higher education (18–23 years): products and
services focussed on college students to improve their
employability, job test preparation, personality
development, etc.
 Continued learning (24+ years): product and services
focussed on skill enhancements, certifications, language
courses, etc.
 B2B: products and services sold to schools, colleges,
companies etc. that enable them to offer online
learnings, enhance their services, improve employee
productivity etc.
K12 and test preparation is the largest sub-segment in the
EdTech space in India and has attracted the most
investments so far. However, continued learnings and higher
education have also witnessed increased investments over
the last 12 months.
While currently most of the EdTech content is standardised
and on-demand basis, there is an increasing trend towards
personalised learning with more engagement through
gamification/entertainment and immersive learnings (AI/VI).
The other key trend emerging in the sector is consolidation.
Byju’s, inundated with the recent funding, acquired WhiteHat
Jr and Aakash Institute in 2020 to expand its product
offerings. There are media reports that Byju is looking to
competing K-12 and test competition platform, Toppr, for
US$150 mn in order to strengthen in its market positioning.
Unacademy, the other leading EdTech platform in India, has
also been very active in M&A over the last 12-18 months. The
company has made seven acquisitions since 2020 with the
latest being that of Tap Chief in Feb-2021.
Figure 51: K12 and test preparation is the largest sub-segment in the EdTech space in India
Source: PGA Labs
Figure 52: K-12 and test preparation accounted for 70-90% of funding over the last four years
Source: PGA Labs
 Play schools
 Day care
 Educational
games
 Supplemental
school
education
 Competitive
exam prep i.e.
Civil services,
CAT, etc.
 For college
students: Skills
assessment, job
search, test
prep and
personality
development
 For corporate
training and
development
 Vocational
training
 B2B sales to
schools,
colleges,
companies etc.
 Online learning
modules,
training courses,
Edtech SaaS,
etc.
Pre-school
(0 – 5 yrs)
K-12 and test
preparation
(6 – 17 yrs)
Higher
education
(8 – 23 yrs)
Continued
learning
(24+ yrs)
B2B
200
700
500
1980
21
30
58
142
40
98
48
84
10
6
11
12
9
13
2
7
0
500
1,000
1,500
2,000
2,500
2017 2018 2019 2020
K-12 & test prep Continued learning Higher Education Pre-K B2B
Total funding in Edtech sector (US$ mn)
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EdTech market is expected to reach US$4 bn by 2025
Given the high under-penetration of online education and
inherent legacy issues in the current education system,
EdTech in India is well poised for strong growth over the
medium to long term. Further, COVID-19 has facilitated the
adoption of online learning. According to Blumes Venture,
one of the leading VC funds in the EdTech space in India,
the size of the EdTech market was US$750 mn in 2020
which is expected to reach US$4 bn by 2025.
That said, we believe price points of current offerings will
need to come down for mass scale adoption. For example,
the cost of a class 10 math and science product is
c.US$350 which is higher than average annual school fees
of 94% of the K-12 students. Further, EdTech platforms will
need to develop credible measuring mechanisms to show
the effectiveness of their online education.
Figure 53: EdTech market in India is expected to grow by 5x by 2025
Source: Blume Ventures
Current Education market:
US$135bn
K-12:
US$1.5bn
Continued learning:
US$964mn
Higher education:
US$884mn
Pre-school:
US$180mn
B2B:
US$341mn
Others:
US$95mn
Current
Edtech
market:
US$750mn
Estd size of
EdTech market
by 2025
US$4bn
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Indian SaaS
Even as “software takes over the world”, the nature of software is changing as is the process of software
development sales. Indian businesses, once relegated to services, are now making rapid strides in
product development.
27% of technology unicorns are SaaS
Compared to the consumer internet sector, Indian SaaS
industry has largely remained under the radar for most part of
the last decade until recently when the current pandemic
(COVID-19) accelerated the adoption of digital technology
and provided an impetus to the Indian SaaS sector. There are
currently 12 Indian SaaS unicorns out of total 44 technology
unicorns, highlighting the importance of the sector.
Indian SaaS companies have doubled over the last
five years
The genesis of the new age India SaaS companies dates back
to 2005 with the incorporation of Zoho followed by emergence
of other start-ups such as Freshworks (earlier known as
Freshdesk), Unmetrics, Chargebee, Qubole, etc. However,
India’s SaaS ecosystem has flourished over the last five years
with the number of SaaS companies doubling during the
period. According to the recent Bain report, there are 7-8k
Indian SaaS companies currently vs. 4-5k five years ago.
The strong surge in Indian SaaS companies can be
attributed to
 Vast availability of IT trained professionals. The success
of the Indian IT services sector is instrumental in enabling a
strong IT-trained work force in India. Besides many global
tech and non-tech companies have opened their IT back
offices or R&D centres in India which has also added to the
growth of IT workforce. As per Nasscom, there are currently
4.45 mn professional working in the IT services sector out of
which 25% are trained in new digital technologies. Also,
there are over 3 mn software professional in India and 100k+
SaaS professionals (as of 2019).
 Relatively economical cost of business set up.
Compared to other internet businesses, the initial cost of
setting up a SaaS business is not high as the
requirement of workforce is low. A SaaS business can
be founded and tested for business case with the
number of employees being in single digit or low double
digit. We note that Postman had 250 employees when it
received series C funding of US$150 mn, valuing the
company at US$2.0 bn valuation.
Further, the salary levels in India are lower than that in other
developed countries such as the US, UK, etc. Additionally,
even in India SaaS companies are being incorporated in
non-traditional places such as Chennai. Chennai has
emerged as the centre of SaaS innovation in India. There
are 15k+ software professionals in Chennai.
 Increased adoption of digital technologies. The
emergence and adoption of new technologies such as
cloud, mobile, RPA, AI, and the like over the last 5-10
years has not only facilitated increased penetration of the
SaaS business model but also brought about new
verticals/areas where SaaS can be deployed. For
example cyber security, API, analytics, have become
emerging areas of focus for SaaS companies.
 Increased availability of funding. VC and PE funding
has also increased over the last five years with some of
the early Indian SaaS companies establishing their
business models, thus providing support to the Indian
SaaS ecosystem.
The valuation of some of the SaaS companies has seen
considerable growth during the current pandemic.
Figure 54: There are 7k-8k Indian SaaS start-ups currently (vs. 4k-5k in Dec-2015)
Source: Tracxn, Bain India SaaS report 2020
4K - 5K
7K - 8K
5 yrs ago Now
SaaS companies founded
~10
40+
5 yrs ago Now
SaaS companies raising late stage funds
~500
~1200
5 yrs ago Now
SaaS companies raising funds
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 A more developed ecosystem. Over the last decade, the
Indian SaaS ecosystem has gained strength with the
participation from many VCs/PE (global and domestic),
emergence of active angel investor community, government
support, SaaS community development (SaaSBoomi,
Nasscom and the like). We also highlight that the success
of first generation entrepreneurs has aided in the creation of
the SaaS ecosystem in India. According to Nasscom, at
least 22 start-ups have been formed by the alumnus of
Zoho (founded by Sridhar Vembu).
Figure 55: Funding for Indian SaaS companies has improved considerably over the last two years…
Note: 2020 data as of June 2020. Source: Pitchbook; https://www.svb.com/blogs/priya-rajan/the-indian-saas-landscape
Figure 56: …and, also the valuations of Indian SaaS companies have surged
Source: Nasscom; Credit Suisse
0.1
0.1 0.1
0.1
0.2
0.3
0.4 0.4 0.4 0.4
1.0
0.7
24
28
37
76 82
121
176
222
174 174 169
57
0
50
100
150
200
250
0.0
0.2
0.4
0.6
0.8
1.0
1.2
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Capital invested (US$ bn) Deal count
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
-
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
9.5
10.0
10.5
11.0
11.5
12.0
12.5
13.0
13.5
14.0
Freshworks (Yr 0: 2011) Postman (Yr 0: 2014) iCertis (Yr 0: 2009) CitiusTech (Yr 0: 2005)
Browserstack (Yr 0: 2011) Zenoti (Yr 0: 2010) Innovaccer (Yr 0: 2014)
Time (yrs)
Valuation
($
bn)
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Product offerings of Indian SaaS companies have
evolved over the last five years
Further, Indian SaaS companies have evolved in their
product offerings as well from a decade ago. While the initial
Indian SaaS companies were largely focussed on horizontal
product offerings such as ERP or CRM solutions, over the
last five years Indian SaaS enterprises have expanded in to
vertical SaaS solutions (targeting specific industry verticals
such as retail, logistics, healthcare, travel, etc) and also in to
emerging technologies such as API, AI/ML, security etc.
COVID-19 has also accelerated demand for SaaS services
for work for home, business continuity, e-commerce
enablement tools and other related services even within the
domestic market. Indian SaaS companies are now focussing
on both enterprises and SMBs covering global as well as
domestic markets.
Figure 57: Indian SaaS companies have broadened their product offering to vertical SaaS and emerging technologies
Source: Bain India SaaS report 2020
Figure 58: Indian SaaS companies are now focussing on both enterprises and SMBs across geographies
Source: Bain India SaaS report 2020
Horizontal business products targeting
SMBs globally (2011 – present)
Description
• Rise if horizontal solutions, primarily ERP or
CRM related
• Targeting global SMBs using cost arbitrage
and benefiting from strong customer service
talent
Enablers
Examples
• Indian IT giants (TCS, Infosys) developing
customer service & engineering talent en-
masse
• Setup of Indian operations by big tech
companies (Google, Microsoft), gradual return
of trained product managers
• Zoho, Kissflowm, Freshworksm, Chargebee,
Agile, CRM
Vertical SaaS businesses disrupting
underserved markets (2015 – present)
• Companies disrupting underserved markets
and verticals by replacing legacy processes
• Rise of public cloud with entry and growth of
Amazon Web Services, Google Cloud
Platform and Azure
• Zenoti, Innovapptive, Innovaccer, CareStack,
DataWeave, Tookitaki
Broad-based horizontal and vertical
solutions serving enterprises & SMBs
(2018 – present)
• SaaS companies witnessing bottom-up
adoption within enterprises and catering to
different verticals
• Building category leadership in emerging tech
(e.g., APIs, GraphQL, cybersecurity)
• Rise of trained SaaS talent from Wave 1 and
Wave 2 SaaS companies
• Development of ecosystem and better access
to capital
• Postman, Hasura, BrowserStack, Yellow
Messenger, Acceldata
Replacing legacy processes with SaaS solutions
driven by shift of workloads to cloud
Examples: Freight Tiger, Darwinbox
Rising software adoption by value-seeking SMBs in
the increasingly digitized domestic market
Examples: OkCredit, Kahatabook, Instamojo, Teachmint,
LoveLocal
Globally competitive product-led companies
differentiated on tech; strong network effects
driving bottom-up adoption
Examples: Postman, BrowserStack, Hasura, DataWeave
Underpenetrated, fast-growing global SaaS SMB
market; cost arbitrage vs global peers through
inside sales focus
Examples: Freshworks, Zoho, Chargebee, Hubilo
Enterprises
SMB
India for India India for the world
Customer geography
Customer
scale
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30
Indian SaaS market share likely to increase to 5% by
FY25
According to Nasscom, the size of the Indian SaaS market
was US$3.5 bn in FY20 growing at a two-year CAGR of
c.30% from US$2.1 bn in FY18. Also, the components of
domestic revenue increased from 21% in FY18 to 25% in
FY20. Further, pure play Indian SaaS companies
contributed 70-72% of SaaS revenues in FY20 while the
contribution from global SaaS companies was 16-18% and
that of Indian IT service providers was 10-12%.
According to IDC, the size of the SaaS market (Applications
and system infrastructure software) was US$148.5 bn in
2019 and is expected to grow at a five year CAGR (2019-
24) of 13.2% to reach US$276.6 bn by 2024. Also, the
penetration of SaaS—% of total software (cloud and
traditional)—is expected to increase to c.51% by 2024 from
c.34% in 2019. Nasscom estimates the revenue for pure
play Indian SaaS companies can increase by 6x to US$13-
US$15 bn by FY25 from US$2.5 bn in FY20, suggesting
the market share of pure play Indian SaaS companies could
increase to c.5% by FY25 from c.2% in FY20.
We believe Indian SaaS companies are well placed to
capture the strong growth potential in the SaaS market
globally driven by the key competitive advantages the Indian
IT sector enjoys. With the high valuation multiples that SaaS
companies enjoy compared to IT services or other
technology sectors, due to highly scalable and recurring
business models with high margin, we see more Indian
SaaS unicorns emerging over the next 3-5 years.
Figure 59: India SaaS revenue increased at a two-year
CAGR of 30% to US$3.5 bn by FY2020
Figure 60: Figure 12: Pureplay Indian SaaS companies
accounted for 70-72% of India’s SaaS revenue
Source: Nasscom Source: Nasscom
Figure 61: Global SaaS market expected to grow at a
five-year CAGR of c.14% by 2024
Figure 62: Indian SaaS revenue to grow by 6x to US$13-
15 bn by FY25, suggesting market share rise of ~3%
Source: IDC Source: Nasscom
2.1
3.5
0
1
2
3
4
FY18 FY20
Indian SaaS revenues (US$ bn)
79%
21%
FY18
75%
25%
Exports
Domestic
FY20
70%
20%
10%
Pureplay
Global SaaS
ISP
122.5 135.2 151.2 171.6
196.8
224.8
26.0
29.3
33.2
38.4
44.9
51.8
148.5
164.5
184.4
210.0
241.7
276.6
0
50
100
150
200
250
300
2019 2020 2021 2022 2023 2024
Applications System Infra software
SaaS market (US$ bn)
2.5
13 - 15
0
2
4
6
8
10
12
14
16
FY20 FY25
Indian SaaS revenues (US$ bn)
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E-commerce
India lagged the world in e-commerce adoption, challenged by weak internet access, outdated payment
systems and a shallow market. This is changing rapidly, as e-commerce itself adapts to India.
E-commerce penetration in India is 6.5%, offering
significant growth potential
E-commerce is one of the oldest internet economy sectors
in India. And the sector has been through various phases of
competition and consolidation over the last ten years.
Currently, the market is largely dominated by Amazon and
Flipkart with more than 70% market share. However, we
note that more competition is on the horizon with Reliance
Industries looking to aggressively expand its e-commerce
business in the coming months.
From a long-term growth perspective, the sector continues
to offer strong prospects with e-commerce penetration at
6.5% as of 2020 vs c.30% for China.
COVID-19 accelerated e-commerce adoption
Further, COVID-19 provided a boost to e-commerce
penetration in 2020 (it increased by 1.5%) as e-commerce
sales increased by 28% YoY while offline retail sales
declined by c.4% YoY as various lock down measures
increased sales activities on the online platforms. As a
result, total retail sales declined by 2.6% YoY in 2020.
The trend can also be seen from the value contribution of e-
commerce to FMCG sales which increased from 2.6% in 1Q
2020 to 3.1% in 3Q 2020 on an all India basis. In metros, it
increased from 6.4% to 8.6% in 3Q 2020. The YoY growth
of FMCG e-commerce sales is also rising steadily. Card
transaction data from SBI cards also shows increased
spending on the online platforms in 2020. The share of online
retail spend increased to 55% during April-Sep 2020.
Figure 63: E-commerce penetration in India was 6.5% in
2020
Figure 64: Offering strong growth prospects when
compared to China/US
Source: Euromonitor, Credit Suisse Source: e-marketer, Euromonitor, Credit Suisse
Figure 65: Offline retail sales declined in 2020 while e-
commerce witnessed strong growth…
Figure 66: …leading to the total retail sales declining by
c.3% in 2020
Source: Euromonitor, Credit Suisse Source: Euromonitor, Credit Suisse
9
13
20
26
33
42
0%
1%
2%
3%
4%
5%
6%
7%
0
10
20
30
40
50
60
70
2015 2016 2017 2018 2019 2020
e-commerce (US$ bn, LHS) % of retail sales (%, RHS)
31% 31%
15%
9%
7% 7% 6% 6%
0%
5%
10%
15%
20%
25%
30%
35%
CH UK US ID MX IN VN BR
-20.0%
0.0%
20.0%
40.0%
60.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
2015 2016 2017 2018 2019 2020
Offline (% YoY; LHS) Online (% YoY; RHS)
436
487
542
599
657 640
-5%
0%
5%
10%
15%
20%
25%
30%
0
100
200
300
400
500
600
700
2015 2016 2017 2018 2019 2020
Total retail sales (US$ bn, LHS) % change YoY (%, RHS)
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32
High unorganised contribution presents strong growth
prospects for online platforms
One of the key unique aspects of the India retail market is the
higher contribution from the unorganised sector especially in
the grocery space. The unorganised segment is more than
80% of the total Indian retail market while the same for
grocery is c.96%. Also, the online contribution in grocery is in
low single digit while in non-grocery the online contribution is
in the teens. We note that grocery’s share of the total retail
market was c.65% in 2020 increasing from c.60% in 2019.
With total retail market growth due to go back to 9-10% by
2021, we believe the e-commerce market size in India can be
c.US$100 bn by 2025, representing c.10% total retail sales.
Given massive growth opportunities in the grocery vertical, the
sector has seen the emergence of many vertical players—Big
Basket, Grofers, Nykaa, etc. Even established horizontal
companies, such as Flipkart and Amazon, are making increasing
investment in to the segment. The other key theme is hyperlocal
or modernisation of mom-and-pop stores so as to provide
inventory fulfilment and enabling them to do last mile delivery.
Reliance Industries is looking to play a big role in the segment.
We expect e-commerce to remain one of the largest sub-
segments of India’s internet sector due to the strong growth
prospects in organised Indian retail and, thus, support
emergence of more unicorns in the sector.
Figure 67: E-commerce’s contribution to FMCG sales has
inched up in 2020
Figure 68: And also has the share of online retail spend
for SBI cards
Source: Nielsen, Credit Suisse Source: SBI Cards, Credit Suisse
Figure 69: Unorganised segment is more than 80% of
the total Indian retail market…
Figure 70: …while the same for grocery is c.96%.
Source: Euromonitor, IBEF, Credit Suisse Source: Euromonitor, Credit Suisse
Figure 71: Online contribution in grocery is the lowest Figure 72: E-commerce market size in India can
potentially be c.US$100 bn by 2025
Source: Euromonitor, Credit Suisse Source: Euromonitor, BCG, Credit Suisse]
0
2
4
6
8
10
1QCY20 3QCY20
All India Metros
Vaue contribution of E-commerce to FMCG Sales
0%
10%
20%
30%
40%
50%
60%
FY17 FY18 FY19 FY20 1H21
Share of online retail spends
84%
9%
7%
Unorganised
Organised
e-commerce
Non-Grocery
34%
Traditional
96%
Modern
3%
Online
1%
Grocery
66%
17%
1%
7%
% online,
Grocery
% online,
Non-Grocery
% online,
Total retail
sales
42
101
0
200
400
600
800
1,000
1,200
2020 2025E
Offline Online
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1,007
5-year
CAGR of
9.5%
Penetration
6.5%
Penetration
10.0%
US$ bn
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Discretionary
That rapid economic growth boosts discretionary demand is well understood. In India this has been
accompanied by governemnt support for formalisation, development of efficient advertising channels and
professional distributors. Brand owners are developing in several categories.
Strong demand growth in discretionary goods
India’s GDP growth has been remarkably consistent over
various time periods since 1991: over 30, 20, 10 as well as
5 years real growth has averaged 6.5-7.0%. Nominal growth
slowed in the last decade due to slowing inflation, but real
growth held up (Figure 73). Weakness in FY20 (pre-
pandemic) was in our view due to economy-wide destocking
triggered by stress in the financial system; the inevitable
restocking now under way should bring medium-term growth
back to the “normal” range. Outperformance over global
growth in all these periods has been a steady 5-7%.
Steady “excess” growth over a sustained period starts to add
absolute GDP in increasingly large numbers: despite the
outperformance in percentage terms being steady, India’s
incremental share of global GDP has been steadily climbing,
and after the blip of FY20 and FY21, is likely to rise again
(Figure 74).
Affordability of several discretionary goods has increased
meaningfully, even if rising income inequality has dampened
that trend a bit. At India’s current level of per capita GDP
and sustained growth, consumption of several discretionary
items like in personal care (Figure 75) can be substantial. A
similar trend is visible in other segments like spirits (Figure
77) and packaged foods (Figure 76). Consumption of
processed food in the top 10% of the population is 3x that
in the middle-rung, and only 3% of India’s food is
processed.
Rapid growth in these segments has provided an opportunity
for Indian brands to establish themselves: in our list of
unicorns there are names like Vini Cosmetics, Haldiram’s,
Parle Biscuits, and Allied Blenders that have built strong
businesses over many years. At the same time, there are
dozens of new emerging names in food processing and
nutrition in particular, catering to growing health awareness,
affordability and the shift from loose grains/spices/tea to
packaged and branded goods.
Broad-based and easier brand-building/distribution
Even as recently as a decade back, the market for branded
goods was largely urban: this was partly due to challenges in
brand-building (TV penetration as well as newspaper
readership were mostly urban), affordability (low rural per
capita GDP meant low penetration of most categories), and
distribution costs (lack of roads meant low retail penetration
in villages and infrequent replenishment which raised supply-
chain costs, as inventory-holding is the most important cost
element for distributors and retailers). In several categories
like perishables that need a cold-chain, or consumer
appliances that need electrified households, large parts of
the Indian market were inaccessible.
Further, advertising platforms were mostly national: national
newspapers and broadcast TV, which restricted brand reach to
those firms that could amortise those costs over a national
distribution setup. This itself acted as a barrier to entry. So was
distribution: the retail channel was highly fragmented, as were
the intervening layers of wholesalers and distributors. Most
large companies therefore owned their distribution channels.
Figure 73: Steady GDP growth and outperformance Figure 74: India’s share of incremental global GDP rising
Source: World Economic Outlook, Credit Suisse Source: World Economic Outlook, Credit Suisse
0%
2%
4%
6%
8%
10%
12%
14%
30Y 25Y 20Y 15Y 10Y 5Y
World GDP India GDP
Growth CAGR (Nominal)
0%
1%
2%
3%
4%
5%
6%
7%
8%
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
Incremental share of India's GDP in
world GDP growth (Trailing 10 years) Projection
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Figure 75: The S-curve for personal care
Source: World Economic Outlook, Euromonitor, Credit Suisse
Figure 76: The S-curve for packaged foods
Figure 77: The S-curve for spirits
China
India
Indonesia
Japan
Malaysia
Thailand
Australia
Russia
Brazil
South Africa
Canada
USA
France
Germany
UK
0
50
100
150
200
250
300
- 10,000 20,000 30,000 40,000 50,000 60,000
Consumption
per
capita
(US$)
GDP per capita (US$)
Personal care
China
India Indonesia
Japan
Malaysia
Thailand
Australia
Russia
Brazil
South
Africa
Canada USA
France
Germany
UK
-200
0
200
400
600
800
1000
1200
1400
1600
- 10,000 20,000 30,000 40,000 50,000 60,000
Consumption
per
capita
(US$)
Packaged foods
China
India
Indonesia
Japan
Malaysia
Thailand
Australia
Russia
Brazil
South
Africa
Canada USA
France
Germany
UK
0
50
100
150
200
250
300
350
- 10,000 20,000 30,000 40,000 50,000 60,000
Consumption
per
capita
(US$)
Spirits
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All these challenges are now less severe. Specialised
distribution firms have come up (like Delhivery and Udaan
in our list), and modern trade is gaining share steadily
along with e-commerce, providing distribution for new
innovative products and brands to get set up without the
need for scale. New firms need only focus on production
and branding, and the distribution, from small-volume/
numerous-SKUs (Stock-Keeping Units) like nail-polishes
to large-volume/few-SKUs like processed food.
The ability to reach a wider audience through a more
selective advertising channel has also improved, as
smartphone penetration in many areas exceeds TV
penetration (still low: Figure 79). Cheap data has driven
up mobile video viewing, and provided firms the ability to
build brands deep into the income pyramid both in rural
(Figure 80) and urban areas (Figure 81).
Figure 78: Modern-trade/e-commerce gaining share Figure 79: TV penetration is low in India
Source: World Economic Outlook, Credit Suisse Source: World Economic Outlook, Credit Suisse
Figure 80: Expanding advertising reach with data (rural) Figure 81: Expanding advertising reach (urban)
Source: NSSO, Credit Suisse Source: NSSO, Credit Suisse
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Traditional Grocery Specialist stores
Modern Grocery E-commerce
0% 20% 40% 60% 80% 100%
India Rural
India
China
India Urban
Germany
UK
Japan
France
USA
Spain
Russia
TV Penetration in Households
0%
5%
10%
15%
20%
25%
1 2 3 4 5 6 7 8 9 10 11 12
In Advt Reach in 2012 Incremental by 2020 Out of Advt Reach
Branded Rural Consumption by
Fractiles (% of Total Rural branded)
4%
76%
20%
0%
5%
10%
15%
20%
25%
1 2 3 4 5 6 7 8 9 10 11 12
In Advt Reach in 2012 Incremental by 2020 Out of Advt Reach
Branded Urban Consumption by
Fractiles (% of Total Urban branded)
67%
32%
1%
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36
Pharmaceuticals/Bio-Tech
India’s switch to process patents between 1971 and 2005, and then the growth in the US generics
industry have helped create a large and vibrant ecosystem of companies and people. With expanding R&D
budget pools, Indian industry is also now starting to move beyond generics.
Domestic pharma market supported cash flows
The Indian domestic pharma market has grown by 15% CAGR
over the last 20 years (Figure 82). India is mostly a branded
generics market with high operating profit margins. In such
markets, brands, while hard to build, once established can drive
sales for multiple decades sometimes, similar to consumer
products, and unlike the 10-12 years of patent protection that
innovator drugs effectively get. These firms therefore tend to
generate significant amounts of cash over time.
Growth in the domestic market has been supported by a
steady increase in the number of doctors (Figure 85):
earlier, a shortage of doctors writing prescriptions was and
remains a challenge. As medical college capacity is still
increasing, the number of doctors is likely to rise further,
particularly after recent reforms in medical education.
Similarly, the physical infrastructure has improved
meaningfully as well, with the private sector starting to
invest, and several new chains coming up (Figure 84).
Similar improvements are visible in diagnostic chains as well.
Given low healthcare spending in healthcare and ~80% of
that being out-of-pocket, the government has been boosting
public expenditure on healthcare. The Ayushman Bharat
insurance scheme launched a few years back focusses on
tertiary care, and built on earlier schemes that were much
smaller in size. The government’s priority now is on
improving primary care infrastructure: a focus over the next
five years.
Figure 82: Domestic Indian market grew 15% CAGR 2000-
20
Figure 83: Number of doctors in India has been rising
Source: CMIE, Credit Suisse Source: World Bank, Credit Suisse
Figure 84: Private sector hospital bed capacity expanding Figure 85: Pharmaceutical industry employment
Source: World Bank, Credit Suisse Source: CMIE, Credit Suisse
0%
5%
10%
15%
20%
25%
0
300
600
900
1,200
1,500
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
India Market (₹ bn) YoY % (RHS)
0.40
0.50
0.60
0.70
0.80
0.90
1.00
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Physicians (per 1000 people)
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2010 2020
Government Private
Hospital beds per 1000 people
0%
12%
24%
36%
48%
60%
0
100,000
200,000
300,000
400,000
500,000
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Employment (k) YoY growth % (RHS)
Pharma employment of listed corporates
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A large and vibrant ecosystem is now in place
After the introduction of process patents in 1971, tens of
thousands of firms were set up: from companies processing
intermediates, producing bulk drugs and packaging material
to formulations firms building brands and selling to doctors.
Just the listed firms now employ more than 400k workers
on their rolls, having grown 4x over the past decade (Figure
85). The number of unlisted firms is many times the number
of listed ones and so would be their employment.
This ecosystem takes advantage of skills available in other
firms, and many a times one firm meeting with success in a
market (e.g. Cipla, Dr Reddy’s and Ranbaxy in the 1990s in
the US, or Torrent in Brazil) drives a string of others, often
with the same team.
Strong growth in exports has helped with scale
This ecosystem set-up provides competitive strength in
export markets. While growth over the past five years has
been slightly lower in the domestic market, it has been
compensated by faster growth in export markets (Figure
86): exports are now 72% of revenues for the Indian
pharmaceutical industry (Figure 87). Generics exports
require some upfront investments in filings and regulator-
approved manufacturing plants.
Most if not all of these sales are in generics, primarily
unbranded generics. However, despite the 98-99% price
declines for manufacturers after a molecule goes off-patent,
in a stable market 40% gross margins are possible, and
given a largely institutional sales force, the flow-through to
operating and net profits is meaningful.
Return ratios in pharma have seen a few cycles over the past two
decades: there is a period of high returns, which then attracts
new (primarily Indian) competitors, pushing down returns over the
next several years. Over a cycle, though, the returns are strong
and have provided funding support to the industry.
Innovations in sales and marketing
While the domestic pharmaceutical industry has seen some
consolidation over the past decade, with the share of top 10
firms rising from 68% in FY11 to 74% now (Figure 88),
several domestic-only pharmaceutical firms have used
innovative sales and marketing techniques to sharply expand
the market, and have in the process risen up the ranks:
several (Intas, Macleods, Bharat Biotech) appear in our list.
Industry has gained scale: can invest in R&D now
As a result of growth, the R&D budgets of the industry have
risen from Rs20 bn to Rs130 bn now (Figure 89), with
several of the larger firms now having annual R&D budgets
exceeding US$200-250 mn/year. While this is not enough
to develop new molecules, several are now investing in
specialty pharma pipelines.
Indian firms are also investing in upcoming opportunities like
biosimilars early enough to participate in the high-margin phases.
The development and availability of skills in biotech are also now
showing up in the growth of firms like Anthem Biosciences.
Figure 86: Pharma/biotech exports continues to grow Figure 87: Exports are now 72% of industry revenues
Figure 88: The industry has consolidated a bit 2010-20 Figure 89: R&D budgets of Indian pharma firms rising
-8%
0%
8%
16%
24%
32%
0
5
10
15
20
25
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Pharma exports (US$ bn) YoY growth % (RHS)
64%
66%
68%
70%
72%
74%
76%
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
Export share of revenues
62%
64%
66%
68%
70%
72%
74%
76%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Share of top 10 pharma as % of total listed
0%
1%
2%
3%
4%
5%
6%
7%
8%
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
R&D Expense (₹ bn) As % of sales (RHS)
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38
Wealth created by the unicorns for
mostly first-generation entrepreneurs
more likely to be invested again in new
start-ups, and also attract new
entrepreneurs as well as private equity
investors.
“
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India's 100 unicorns

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