Neelkanth Mishra, Credit Suisse, shares his views on the changing corporate landscape with the addition of 100 plus unicorns and the medium term changes accelerated by pandemic.
ET Now: After lockdown phase- we saw there was an unprecedented pace of new companies getting formed, what is going to be the entire texture and shape of India Inc 5-10 years from now?
Neelkanth Mishra: The report on 100 unicorns was figured by a view shared in a group meeting in January, where we found we had 25-30 unicorns and I think by the end of the year we could be at 35-40. That set me thinking what impact it is going to have on economy if the pace of formation of billion dollar plus companies is this fast
We have also examined the report so we should not be biased against firms which are self sustaining, self funding like the fascinating new trend of software service where the shift to Cloud computing has changed the way software is developed, used and paid for. It is creating massive opportunities in India in terms of jobs, incomes and wealth creation. As I started exploring these companies, we figured that there are more than a 100 companies. Even I believe we had to cut down numbers, in fact after we published the report, we found additional companies that we could have added.
It is not just in the tech space–ecommerce, edu tech,
companies which have many other drivers that have been accelerated during the pandemic. It is also companies in software, biotech, pharmaceuticals, consumer goods and even industrials. In many ways, the number is self perpetuating. There is so much activity in unlisted space which has 100 plus companies compared to 330 odd companies in the listed space which have a billion dollar plus valuation, and two-thirds of unlisted ones have started after 2005 so what changed, what has driven this?
The entrepreneurship in India has always been there. Even in the 1980s, Ministry of Corporate Affairs data showed growth of private firm registration was still in double digits, the problem was lack of capital because of India’s low wealth per capita and a very small percentage of that went in financial assets. So the new investments were being curtailed by that factor.
The surge in private equity has been absolutely transformative, in each of the years of the last decade private equity injections have been bigger than public market equity fund raising. And now that it has created these 100 plus unicorns and over 240 billion dollars of valuation, there is 35 to 50 billion dollars of new wealth created for the promoters of these firms. A lot of this is going to get reinvested in risk capital and the kind of firms that were financed in the last five years is absolutely fascinating. These firms are targeting Indian problems, they are using high standard of technology, they are supremely talented, they have experience.
I was listening to a session on edutech yesterday and it is impossible to say which firm, whether founded in the US or in India, is going to dominate that space because it is all about content and it is about the internet. The pandemic has brought down the inertia of using educational content on the internet and it becomes independent of whether the content was created by a US firm or an Indian firm. Indian firms are now generating revenues in the US in software service. It is not surprising that the talent development, the shift from services to products and SAS is actually somewhere in the middle, therefore easier transition is actually happening at a very rapid clip.
The number of software service start-ups is mushrooming, though there will be excesses and shakeout but the number of unicorns in software service could actually accelerate. In 1995, who would have thought that most of the software in the world would be made in India or that 45-50% of the workforce of large global banks will be based in India. So in the next 15 years, in the next five years, why should not educational content, training content be actually all developed in India and so there are significant medium term changes which have been triggered and accelerated by the pandemic which are positive for a country like India.
